```

[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

             H.R. 3327, CABIN USER FEE FAIRNESS ACT OF 1999

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

                                HEARING

                               before the

               SUBCOMMITTEE ON FORESTS AND FOREST HEALTH

                                 of the

                         COMMITTEE ON RESOURCES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                     MARCH 23, 2000, WASHINGTON, DC

                               __________

                           Serial No. 106-77

                               __________

           Printed for the use of the Committee on Resources

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                                   or
           Committee address: http://www.house.gov/resources
                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
65-437                      WASHINGTON : 2000

                         COMMITTEE ON RESOURCES

                      DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana       GEORGE MILLER, California
JAMES V. HANSEN, Utah                NICK J. RAHALL II, West Virginia
JIM SAXTON, New Jersey               BRUCE F. VENTO, Minnesota
ELTON GALLEGLY, California           DALE E. KILDEE, Michigan
JOHN J. DUNCAN, Jr., Tennessee       PETER A. DeFAZIO, Oregon
JOEL HEFLEY, Colorado                ENI F.H. FALEOMAVAEGA, American 
JOHN T. DOOLITTLE, California            Samoa
WAYNE T. GILCHREST, Maryland         NEIL ABERCROMBIE, Hawaii
KEN CALVERT, California              SOLOMON P. ORTIZ, Texas
RICHARD W. POMBO, California         OWEN B. PICKETT, Virginia
BARBARA CUBIN, Wyoming               FRANK PALLONE, Jr., New Jersey
HELEN CHENOWETH-HAGE, Idaho          CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California     CARLOS A. ROMERO-BARCELO, Puerto 
WALTER B. JONES, Jr., North              Rico
    Carolina                         ROBERT A. UNDERWOOD, Guam
WILLIAM M. (MAC) THORNBERRY, Texas   PATRICK J. KENNEDY, Rhode Island
CHRIS CANNON, Utah                   ADAM SMITH, Washington
KEVIN BRADY, Texas                   CHRIS JOHN, Louisiana
JOHN PETERSON, Pennsylvania          DONNA MC CHRISTENSEN, Virgin 
RICK HILL, Montana                       Islands
BOB SCHAFFER, Colorado               RON KIND, Wisconsin
JIM GIBBONS, Nevada                  JAY INSLEE, Washington
MARK E. SOUDER, Indiana              GRACE F. NAPOLITANO, California
GREG WALDEN, Oregon                  TOM UDALL, New Mexico
DON SHERWOOD, Pennsylvania           MARK UDALL, Colorado
ROBIN HAYES, North Carolina          JOSEPH CROWLEY, New York
MIKE SIMPSON, Idaho                  RUSH D. HOLT, New Jersey
THOMAS G. TANCREDO, Colorado

                     Lloyd A. Jones, Chief of Staff
                   Elizabeth Megginson, Chief Counsel
              Christine Kennedy, Chief Clerk/Administrator
                John Lawrence, Democratic Staff Director
                                 ------                                

               Subcommittee on Forests and Forest Health

                 HELEN CHENOWETH-HAGE, Idaho, Chairman
JOHN J. DUNCAN, Jr., Tennessee       ADAM SMITH, Washington
JOHN T. DOOLITTLE, California        DALE E. KILDEE, Michigan
WAYNE T. GILCHREST, Maryland         OWEN B. PICKETT, Virginia
JOHN PETERSON, Pennsylvania          RON KIND, Wisconsin
RICK HILL, Montana                   GRACE F. NAPOLITANO, California
BOB SCHAFFER, Colorado               TOM UDALL, New Mexico
DON SHERWOOD, Pennsylvania           MARK UDALL, Colorado
ROBIN HAYES, North Carolina          JOSEPH CROWLEY, New York
                     Doug Crandall, Staff Director
                 Anne Heissenbuttel, Legislative Staff
                  Jeff Petrich, Minority Chief Counsel
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held March 23, 2000......................................     1

Statements of Members:
    Chenoweth-Hage, Hon. Helen, a Representative in Congress from 
      the State of Idaho.........................................     1
        Prepared statement of....................................     2
    Nethercutt, Hon. George, a Representative in Congress from 
      the State of Washington....................................     3
        Prepared statement of....................................    10

Statements of witnesses:
    Betts, Richard M., MAI, ASA, SRA, Betts & Associates, 
      Berkley, CA................................................    52
        Prepared statement of....................................    54
    Brouha, Paul, Associate Deputy Chief, National Forest System, 
      U.S. Forest Service........................................   100
        Prepared statement of....................................   102
    Mead, David R., President, Sawtooth Forest Cabin Owners' 
      Association, Twin Falls, ID................................    11
        Prepared statement of....................................    14
    Ver Hoef, Mary Clarke, Chair, Governmental Liaison Committee, 
      National Forest Homeowners, Sacramento, CA.................    40
        Prepared statement of....................................    41
    Schultz, J. Carl, The Appraisal Foundation, Washington, DC...    88
        Prepared statement of....................................    90

 
             H.R. 3327, CABIN USER FEE FAIRNESS ACT OF 1999

                              ----------                              

                             MARCH 23, 2000

                  House of Representatives,
          Subcommittee on Forest and Forest Health,
                                    Committee on Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 2 p.m., in room 
1334 Longworth House Office Building, Hon. Helen Chenoweth-Hage 
(chairman of the Subcommittee) presiding.
    Members present: Representative Chenoweth-Hage.

  STATEMENT OF HON. HELEN CHENOWETH-HAGE, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF IDAHO

    Ms. Chenoweth-Hage. The Subcommittee on Forest and Forest 
Health will come to order. The Subcommittee is meeting today to 
hear testimony on H.R. 3327, the Cabin User Fee Fairness Act of 
1999 introduced by Representative George Nethercutt.
    Under Rule 4(g) of the Committee rules, any oral opening 
statements at hearings are limited to the Chairman and the 
Ranking Minority Member. This will allow our witnesses to be 
heard sooner and help Members and our witnesses keep to their 
schedules. Therefore, if other Members do have any statements, 
they will be entered into the record under unanimous consent.
    Now today's Subcommittee hearing is on H.R. 3327, the Cabin 
User Fee Fairness Act of 1999. I am pleased to be able to bring 
this bill before the Subcommittee for discussion as it is long 
overdue and most certainly needed to address the flawed Forest 
Service appraisal policies for recreation resident user fees.
    In October 1997, when the Subcommittee met on the issue of 
recreation residence user fees, I made the observation that 
many would like to portray the cabin leaseholders as wealthy 
aristocrats making use of Forest Service land for well below 
fair market rates. Sadly, this observation is still the basis 
for many of the arguments that we continue to hear today.
    But the truth of the matter is that the majority of cabin 
owners are either retired or middle-class working families. The 
incomes of these citizens do not allow for the excessive fee 
increases that the Forest Service is proposing. The result of 
the substantially higher fees will be to force out many middle-
class cabin owners, allowing only the wealthiest of Americans 
to enjoy these recreational opportunities. I do not think that 
is what any of us want.
    The key is to look at the appraisals themselves. Based on 
the ones that have been conducted, the Forest Service is making 
the same mistakes with this round of appraisals that it made in 
the 1980's. The Forest Service wants to compare these cabins to 
privately-owned residences, but this obtains a false appraisal 
since the cabins are not on private property and not subject to 
the same constitutionally guaranteed rights we enjoy with 
private property.
    Some simple differences are that cabin owners cannot use 
their cabins all year long, and they cannot use them for 
commercial purposes, and they cannot control access to their 
cabins, and they cannot make improvements or even modifications 
to their cabins with express approval from the Forest Service. 
In the marketplace, these factors would have a very different 
bearing on an appraisal. If fair market value is to be 
determined, then the key word here is fair. We need to give the 
cabin owners a fair appraisal, a fair review process and a fair 
user fee.
    I would like to thank Mr. Nethercutt for introducing H.R. 
3327 to correct this egregious situation and establish an 
appraisal process for the Forest Service that is fair to 
taxpayers, as well as, current cabin owners. I would also like 
to thank some folks who I see in the audience who have played a 
very important role in helping this bill along the way. Paul 
Allman, the director of Cabin Owner Affairs for the American 
Land Rights Association, and Joe Corlett, an appraiser from my 
home State in Idaho. Gentlemen, thank you all for your hard 
work. I really appreciate you and I would also like to add my 
thanks to the Appraisal Institute and the American Society of 
Farm Managers and Rural Appraisers for their time and attention 
to the details of this legislation.
    The Chairman now recognizes Mr. Adam Smith for any 
statements that he may have.
    [The prepared statement of Ms. Chenoweth-Hage follows:]

   Statement of Hon. U.S. Hon. Helen Chenoweth, a Representative in 
                    Congress from the State of Idaho

    Today's Subcommittee hearing is on H.R. 3327, the Cabin 
User Fee Fairness Act of 1999. I am pleased to be able to bring 
this bill before the Subcommittee for discussion as it is long 
overdue and most certainly needed to address the flawed Forest 
Service appraisal policies for recreation resident user fees.
    In October of 1997, when the Subcommittee met on the issue 
of recreation residence user fees, I made the observation that 
many would like to portray the cabin leaseholders as wealthy 
aristocrats making use of Forest Service land for well below 
fair market rates. Sadly, this observation is still the basis 
for many of the arguments we continue to hear today.
    But the truth of the matter is that the majority of cabin 
owners are either retired or middle-class working families. The 
incomes of these citizens do not allow for the excessive fee 
increases that the Forest Service is proposing. The result of 
the substantially higher fees will be to force out many middle-
class cabin owners, allowing only the wealthiest of Americans 
to enjoy these recreational opportunities.
    The key is to look at the appraisals themselves. Based on 
the ones that have been conducted, the Forest Service is making 
the same mistakes with this round of appraisals that it made in 
the 1980s. The Forest Service wants to compare these cabins to 
privately owned residences, but this obtains a false appraisal 
since the cabins are not on private property and not subject to 
the same constitutionally guaranteed rights we enjoy with 
private property.
    Some simple differences are that cabin owners cannot use 
their cabins all year long, they cannot use them for commercial 
purposes, they cannot control access to their cabins, and they 
cannot make improvements or even modifications to their cabins 
without express approval from the Forest Service. In the 
marketplace, these factors would have a direct bearing on an 
appraisal. If fair market value is to be determined, then the 
key word is fair. We need to give the cabin owners a fair 
appraisal, a fair review process, and a fair user fee.
    I would like to thank Mr. Nethercutt for introducing H.R. 
3327 to correct this egregious situation and establish an 
appraisal process for the Forest Service that is fair to 
taxpayers as well as current cabin owners. I would also like to 
thank some folks who I see in the audience who have played an 
important role in helping this bill along the way. Paul Allman, 
the Director of Cabin Owner Affairs for the American Land 
Rights Association, and Joe Corlett, an appraiser from my home 
State of Idaho. Gentlemen, thank you for all your hard work. I 
would also like to add my thanks to the Appraisal Institute and 
the American Society of Farm Managers and Rural Appraisers for 
their time and attention to the details of this legislation.

    Mr. Smith. Actually, I do not have a statement at this 
time, Madam Chair. I will just wait for the testimony. Thank 
you.
    Ms. Chenoweth-Hage. Thank you, Mr. Smith. And now I would 
like to recognize the author of this legislation, Mr. George 
Nethercutt.

   STATEMENT OF HON. GEORGE NETHERCUTT, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Nethercutt. Thank you, Madam Chairman and 
Representative Smith. Thank you for being here and for holding 
this hearing on our bill, the Cabin User Fee Fairness Act of 
1999. I also want to thank the staff, Veronica Rolocut and the 
other staff members who have made this hearing possible. You 
have worked very well with our staff and we appreciate that 
very much.
    Madam Chairman, in 1915, Congress authorized the Recreation 
Residence Program through the Term Permit Act, which allows 
families to construct rustic cabins on small lots in areas of 
the forest set-aside for that purpose. Twenty years ago, the 
U.S. Forest Service began its first appraisal cycle, basing the 
annual fees determined by 5 percent of the sites' land only 
appraised sites. This cycle of appraisals is now underway and I 
have heard from cabin owners on Federal lands throughout 
Washington, Idaho and other areas in the West who are 
experiencing enormous increases in their annual fees. I suspect 
that every Member of this Panel who may be here today has had 
constituents who have been affected by this reappraisal that is 
currently going on. So it is of interest to us as 
Representatives and of interest to those of us who represent 
people who are affected by this issue.
    In Washington, Oregon and Idaho there are more than 3,400 
recreation residences on U.S. Forest Service lands and today 
many of these cabins on Forest Service lands are still owned by 
the original family. They have been passed down from generation 
to generation and used by a wide range of people in varying 
economic conditions. I think this tradition is worth 
preserving. Speaking personally, I as a young boy had parents 
who felt that recreation activity at Priest Lake, Idaho was 
valuable and a valuable lifestyle to experience on weekends and 
in summers.
    And so from a young age, I can recall my parents taking us 
to our cabin, and it was not a Forest Service cabin or a State 
of Idaho cabin. It was a fee simple cabin that had great 
freedom for the landowner to do what we wished on our lot. And 
I know as a young boy and now as an adult, I appreciate those 
times for families and for people of modest income to have a 
place to go in the summertime that is clean and healthy and 
enjoyment of our natural resources in our part of the world.
    In many cases under the current appraisal procedures, these 
families are being unfairly penalized because of problems in 
the appraisal process. I currently have an ownership interest 
in a State of Idaho lease on the east side of Priest Lake, ID 
and I think the Forest Service people, cabin owners have 
problems. You have got to be in the State of Idaho. Our annual 
fees have been severely increased in our appraisals and it is 
my own darn fault, because I am working on this job and I am 
not able to be out where I like to live and enjoy the summers 
like we have in the past. But it is a tremendous financial 
burden for those of us who have State leases as well as those 
who have Federal leases.
    I think it is also having a negative impact on the 
tradition of families who use these recreational residences as 
much during the year as they can. We do not want, I do not 
believe to have people priced out of the markets so that we 
only have millionaires or people of means who are able to use 
these Forest Service lands. And so with an enhanced appraisal 
process that results in the Forest Service or other State 
agencies like the one I face, looking at bottom lines and as a 
source of income rather than considering the value to families 
to have--and moderate income families to have a place to go in 
the summer and to enjoy the outdoors, I think we are misplacing 
our priorities as a Federal Government.
    I think as the appraisal process are inconsistent and 
increase, they diminish the ability of a broad range of use of 
people to use these facilities.
    I spoke just yesterday with a gentleman who is a retired 
teacher. His name is Jim Nestle, lives in Spokane, has a cabin 
up in Idaho on Priest Lake and has lost his wife to cancer last 
year. They have come up to this cabin in Priest Lake since 1952 
and he said his fee is now $4,000 a year. He said I am probably 
going to have to sell this cabin, much to the chagrin of my 
grown daughters, who are not people of means, and he said I am 
not a person of means. I have got some retirement coming in 
from teaching over the years, but I cannot afford it. He said 
it breaks my heart to lose this tradition of ownership.
    So there is a real life example of a person who is in a 
tough situation under the circumstances of this increase fee 
appraisal. This bill establishes a new appraisal process to set 
what I believe is a fair fee for Forest Service cabins. Under 
the formula established by the bill, appraisals would be based 
on the raw value of the land, adjusted for structures and 
services provided by the Forest Service. It addresses two major 
concerns with the current appraisal process. The appraisal 
methodology currently used by the Forest Service is not 
arriving at an appropriate value for the use of a lot by a 
cabin owner. A Federal property differs from private land as 
the Chairman stated. You have a great deal of freedom if you 
own the land in fee simple. If you are leasing it, you have 
great restrictions in terms of what you can and cannot do. You 
cannot cut a tree. You cannot paint the cabin. You cannot do a 
lot of things without getting approval which makes sense, but 
on the other hand, it is a reduction in value. So these 
modifications are important and the traditional objectives of 
the Forest Service under the new appraisal process, it seems to 
me, may not be being met because we are going to lose these 
older families who have been on this property for years and 
really value the opportunity for middle income people to have a 
chance to use it.
    I want to hasten, as I close to say there should not be a 
fee, Madam Chairman, and Members of the Subcommittee. There 
must be a fee. I think that is fair. But the current, I think 
disparity in the fee appraisal process today is problematic and 
that is what this bill seeks to remedy--inconsistency in 
appraisal values in different parts of the country and 
different States and it must, I think, in a fee appraisal 
process take into account again, this very valuable resource of 
having people of all income levels, not being shut out from the 
ability to use our Forest Service lands for recreation 
purposes, and the enhancement of their family needs and the 
family needs of all people of all income.
    As I said, I do not think we want to have every cabin on 
Priest Lake, ID, for example, only used and owned by 
millionaires who can afford the exorbitant costs in some cases 
where others cannot.
    So with that I am delighted to have a chance to testify. I 
appreciate your attention and would be happy to answer any 
questions.
    Ms. Chenoweth-Hage. I would thank the gentleman for his 
fine testimony on this very important issue to those of us in 
the Northwest areas. The Chair would remind all parties in the 
hearing room that all cell phones must be turned off and that 
now you can put cell phones on vibrate and still get the 
message that somebody wants you.
    So with that I would like to again thank Mr. Nethercutt and 
ask Mr. Smith, do you have any questions?
    Mr. Smith. Thank you, Madam Chair, I think everyone 
certainly agrees, George, that we do not want to send people 
off the land who have been there for a while for economic means 
and I think there would be wide support for figuring out some 
way to try and avoid that. But that does not necessarily, by 
itself, mean that fair market value is not being found here. It 
does happen sometimes in a given piece of property that is 
being leased goes up in value past the means of the person who 
is there to afford. It just happens, economically happens even 
on privately-held land, the value of the land goes up. If you 
are leasing it, you cannot stay there. So it can happen even if 
the fair market value is being accurately assessed.
    And what I am most interested in is to figure out if the 
fair market value is being accurately assessed and if not, why 
not. If there is a problem here, like I said, and we have to 
come up with some subsidy to allow some people to stay there 
who have been there for a while, certainly that is something we 
can talk about, but it is a little different than getting into 
whether or not the land is being assessed. And I guess I am not 
really sharing clearly what it is about the market-value 
process right now that is wrong other than the fact that some 
of the properties happen to go. I think as you know, not all of 
them. Some of them go down, some go up a little bit and some go 
up a great deal, but you would think that would naturally 
happen in terms of assessing the value of land.
    And as far as the restrictions on the use, the Forest 
Service at least has told me that is something they consider in 
determining the fair market value of the land. So I would just 
like to sort of get a clearer answer on what about the process 
is unfairly setting the value of the land? Because if we change 
that, it gets into a whole lot of other issues. I will let you 
answer that question.
    Mr. Nethercutt. Thanks for the question. It is a fair one. 
I think what bothers me about it is the rapidity of the 
potential for a change in the market that is not reflected in 
the appraisal process, as well as the discount for whether you 
can use it all year round. There has got to be a discount that 
says you have to get approval in order to do what you might 
want to do on your land.
    I know people on Priest Lake, ID who have a public path in 
front of their cabin and that is not taken into consideration 
in my best judgment, I am informed, that you have traffic going 
in front of your cabin all day as opposed to having privacy in 
your cabin. That is not reflected in the market value appraisal 
and then what happens if there is a dip in the market? Is there 
an automatic reappraisal that takes into account that dip?
    My judgment is you look at the value of the land, you 
discount for I guess the inability to have full control over 
the property that you are leasing. You take into account a 
discount for the ability, the inability to use the property all 
year round and that has got clear reduction in value that I do 
not think is being observed. I think they are looking more at 
what is the property worth here versus next door for a fee 
simple or other property around the corner? And so I do not 
think, as I understand it, adequate consideration is not given 
to those factors as well as when you have an increase in value 
and somebody sells out just because they have to sell out. I 
think that then puts--if the prices are so high--that it is 
going to have, I think, an impact on the value that you may be 
able to get for your cabin in 6 months. I think there is a 
seasonal difference in when you sell your cabin. Is it worth 
$300,000 today or is it worth $300,000 in the middle of winter? 
It probably is not worth $300,000 in the middle of winter. I 
think that has to be taken into account.
    Mr. Smith. You understand all that stuff, it cuts both 
ways. I mean I do not think if there was a sudden spike in 
value of the landowners, who want you to come in at that point 
and reappraise.
    Mr. Nethercutt. The question then becomes: Is the Forest 
Service in the business of getting the highest market value it 
can or should it just get a reasonable value?
    Mr. Smith. That is a question I wanted to ask. Do you agree 
or not that the policy of the Forest Service ought to be to get 
fair market value?
    Mr. Nethercutt. I think the question of fair market value 
is subject to different definition.
    Mr. Smith. Certainly.
    Mr. Nethercutt. But I think that the market is subject to 
such change that it is very difficult to get fair market value 
at the time that the appraisal is made. So how do you know what 
the fair market value is going to be today? It may be different 
in 2 weeks. So we do not want the Forest Service doing 
reappraisals every month. So I think what they had best be 
advised is to look at the historical value of the land, 
consider the potential for increases in market value and then 
build in some kind of an inflation factor so there is some 
certainty on the part of the lessee so they can say, ``All 
right, I can accept the fact that it is worth $100,000 today, 
but then let us set over the term of the lease some sort of 
incremental increase that does not subject me to a $3,000 
increase in 2 years.'' Everybody agrees on a number and the 
lessee and the lessor come in and say, ``Here is my value, here 
is your value,'' and they say, ``OK, it is worth $100,000, but 
we are going to increase it 2 percent a year or factor in 
inflation or something,'' rather than say in 2 years, ``Gosh, 
it is worth $3,000 more a year. You have got to pay that.''
    Mr. Smith. Right, and I guess in looking at the bill I am 
not sure we completely capture all of the things that you just 
said. I would be interested in getting there. It seems to me to 
be a little bit less specific what is contained in the bill and 
you talk about a fair fee. What is that? It just seems to me I 
am kind of hearing two messages. No. 1 is we want to get fair 
market value. No. 2, we do not want that fair market value to 
be too much.
    Mr. Nethercutt. Right.
    Mr. Smith. And I hear that, OK, but it is kind of a 
contradictory statement and maybe there are things that we need 
to work out for a specific situation here like I said, to say, 
``OK, fair market value is not going to be the goal. We have 
got some people who we need to protect here.'' But if we are 
doing that, maybe we should specify who it is we are going to 
protect as opposed to protecting everybody regardless of 
economic means.
    So as I look through this further and I know I am out of 
time, but I want to sort of answer that question because it 
seems to me like the main part of the argument is there are 
some people who are being priced out by the fact that fair 
market value is being assessed at a high level that they simply 
cannot afford. As you know in our State, we have the same 
problem with property taxes.
    Mr. Nethercutt. Sure.
    Mr. Smith. With people whose properties--they may have 
bought a house on Mercer Island for $20,000 30 years ago, but 
now it is worth a couple of million, we should all have such 
problems, by the way----
    Ms. Chenoweth-Hage. The gentleman's time is up.
    Mr. Smith. OK, can I just wrap up, 10 seconds. Anyway, I 
just want to look at the bill and make sure that we assess that 
and also I want to hear from you and from the sponsors. What 
are we trying to do here? Are we trying to get a fair market 
value or are we trying to protect people who are being hurt by 
economics. Those can be two different things and I want to make 
sure we account for that. Thank you.
    Ms. Chenoweth-Hage. Mr. Schaffer is recognized.
    Mr. Schaffer. Thank you, Madam Chairman. I actually do not 
have any further questions. I think the gentleman from 
Washington has covered any questions I might have had in his 
opening remarks, but I would yield him with time I have if he 
has any additional response to the previous question.
    Mr. Nethercutt. Well, thanks, Representative Schaffer. I 
would justm state that I do not think it should be the sole 
objective of the Forest Service to get fair market value. I 
think there is great value that ought to be factored into the 
appraisal process about whether the tenant has been a good 
tenant, whether they have taken care of the property, whether 
they are good stewards of the land. There ought to be some 
equity with respect to what is their economic condition, what 
are we going to face with respect to hardships on people, in 
particular.
    Now I have not drafted that all into this bill, but I leave 
it to the good judgment of the Subcommittee and the Committee 
to work with us and we work with you and others who have an 
interest to try to figure that out. But I think there has to be 
some sensible determination that includes these various factors 
of lack of freedom over your property and lack of annual full-
time use and hardship on families and ability to have people 
have access to the land and the tradition of having a tenant 
have that property continue in their control.
    Ms. Chenoweth-Hage. Mr. Schaffer, did you yield your time 
to Mr. Smith? OK.
    Ms. Napolitano, you are recognized for questions.
    Ms. Napolitano. Thank you, Madam Chair. In reading some of 
the background material and looking at some of the information 
that has been given to us, it seems that there is an issue with 
cabin holders' ability to pay in some instances.
    Could you tell me in that particular instance because I 
understand that it was indicated that nationally more than 58 
percent of the people with cabin permits have either had 
decreases or relatively moderate increases in permit fees. What 
do you consider moderate increase?
    Mr. Nethercutt. I do not have any definition of moderate 
increase because it goes across the board. I think it is kind 
of like pornography. I know it when I see it. I think $4,000 
increase is too high. And a lot of it depends--if you are a 
millionaire, it does not bother you, but if you are a person of 
moderate income, it is going to have an impact on you.
    Ms. Napolitano. Then again, I bought my home again for 
$14,500 almost 40 years ago. It is now up in the quarter of a 
million. I pay taxes.
    Mr. Nethercutt. Sure.
    Ms. Napolitano. All of us have to pay taxes and I am 
assuming that these individuals who live in these cabins are 
not there full time. This is not their full time home or 
residence.
    Mr. Nethercutt. I cannot speak for the entire country, but 
I would say you are right, for most of them it is not their 
full time residence, but they do not own it either. You own 
yours. You own your home. You can paint it any color you want. 
You can put trees on it. You can cut them down.
    Ms. Napolitano. This is by choice.
    Mr. Nethercutt. Sure, well, sure it is.
    Ms. Napolitano. Right. So essentially, and I agree--
especially if those individuals who are on fixed incomes--that 
they should have some kind of ability to not necessarily 
negotiate, but be able to be considered less able, if nothing 
else, to be able to meet those obligations, if it goes up by a 
tremendous percentage.
    The estimate of the amount of money that the Department is 
going to lose is somewhere in the vicinity of $4 million?
    Mr. Nethercutt. I do not know that. Is that the case?
    Ms. Napolitano. Eight to twelve million dollars is what we 
are hearing.
    Mr. Nethercutt. Assuming that the appraisals are accurate 
and the appraisal process is fair. I mean you could set the 
appraisal at $500,000 a cabin and then argue that they are 
going to lose an awful lot more.
    Ms. Napolitano. Right.
    Mr. Nethercutt. The challenge is what is the fair market, 
what is the fair appraisal?
    Ms. Napolitano. Just taking a low ball figure, who is going 
to make up for that added income for the Forest Service to be 
able to provide those residents with the support that they 
need?
    Mr. Nethercutt. Well, as one who sits on the Appropriations 
Committee and the Interior Subcommittee, and looks at the 
resources that come into the Forest Service, I would think that 
that is a minor problem for the Forest Service, that amount of 
money, rather than a very major one.
    What would happen would be, I am informed by my staff, it 
goes back to the General Treasury.
    Ms. Napolitano. OK. Well, I just needed some information to 
clarify where that additional funding would be able to come 
through. Thank you.
    Mr. Nethercutt. Thank you.
    Ms. Chenoweth-Hage. I want to say for the record that you 
sure have got a compelling case for the fact that the families 
that play together, stay together and I keep saying that about 
activities on our forest lands. I am also aware of the family 
traditions of people of ordinary means and the fact that it was 
the purpose, stated by Gifford Pinchot and President Theodore 
Roosevelt, to have people settled in the national forests so 
that they can be, in essence, watchdogs. Watchdogs for any 
mischief in our national forests and it is somewhat sad to see 
the way it has changed. But I think that you have brought a 
very well thought out bill to the Committee and I think that it 
will help straighten out some of the ambiguities in the 
process. Thank you very much for your good work.
    Mr. Nethercutt. Thank you.
    Ms. Chenoweth-Hage. On my time I would yield back to you, 
the witness, if you have any further statements that you might 
make for the record?
    Mr. Nethercutt. Well, only to thank the Committee for its 
attention and for your gracious welcome. I just think it is a 
problem that cuts across the country. It really is something 
that I think the Congress should address and it should be done 
fairly and thoughtfully. I am not saying no fee. I am just 
saying I think the spikes are going to have lasting 
consequences, these spikes in income or valuation are going to 
have lasting consequences and may result in a different profile 
of person or family or individuals who use these lands for 
recreational purposes, contrary to the original intent and I 
think that original intent is a valid one. It should be 
sustained and I think it can be sustained if this Subcommittee 
comes forward with a markup on this bill, reporting it out in a 
way that is fair to the Forest Service, but also fair to the 
values that are established by family use of these properties 
at reasonable costs.
    I thank you for your attention, your time, all of you, 
especially you, Madam Chairman.
    [The prepared statement of Mr. Nethercutt follows:]

    Statement of Hon. George R. Nethercutt, Jr. a Representative in 
                 Congress from the State of Washington

    Thank you Chairman Chenoweth-Hage for this opportunity to 
testify today in support of legislation I introduced last fall, 
H.R. 3327, the Cabin User Fee Fairness Act of 1999. I 
appreciate your holding a hearing on this issue of great 
importance to the families that own cabins on U.S. Forest 
Service lands in the Pacific Northwest and on our public lands 
throughout the country. This hearing is an important first step 
toward finding a workable, permanent and fair solution to the 
problems raised in the appraisal process over the last few 
years. I want to thank you for working with us to make sure 
that happens.
    In 1915 Congress authorized the Recreation Residence 
Program, through the Term Permit Act, which allows families to 
construct rustic cabins on small lots in areas of the forest 
set aside for this purpose. In fact, in Washington, Oregon & 
Idaho there are more than 3,400 recreation residences on U.S. 
Forest Service lands and today many of these cabins on forest 
service lots are still owned by the original family, having 
been passed down from one generation to the next. I believe 
this is a tradition worth preserving. Unfortunately in many 
cases under the current appraisal procedures, these families 
are being unfairly penalized because of problems in the 
appraisal process. This is having a negative impact on the 
tradition of family cabin ownership of these cabins--by pricing 
out the families this was set up to help. Let me be clear in 
stating that I do believe the cabin owner should pay a 
reasonable and responsible fee to use the lands. However, the 
current appraisal process will diminish opportunities for 
families to use these lands. This is why I introduced H.R. 
3327, the Cabin User Fee Fairness Act of 1999.
    Twenty years ago, the United States Forest Service 
modernized the fee determination process by providing for a 
twenty-year reappraisal cycle as the basis for periodically 
redetermining the user fees for occupancy of these forest lots. 
The first round of reappraisals began three years ago and 
unfortunately problems have arisen with the fairness of the 
reappraisal. For example, in nearly identical situations in 
Idaho and Kentucky, cabin owners in Idaho who have seen an 
increase of 100 percent above what they are currently paying 
will pay a new average fee of $1,783 annually, while cabin 
owners in Kentucky will pay $140 annually.
    H.R. 3327 will establish a new appraisal process to set a 
fair fee for Forest Service cabins. Under the formula 
established by the bill, appraisals would be based on the raw 
value of the land, adjusted for structures and services 
provided by the Forest Service. The Cabin User Fee Fairness Act 
will address two major concerns with the current appraisal 
process. First, the appraisal methodology currently used by the 
Forest Service is not arriving at the appropriate value of the 
use of a lot by a cabin owner. Federal property differs from 
private land in that the owners do not maintain the same rights 
and privileges to their property as those held by private 
landowners. For example, permit holders cannot make 
modifications to the land or their cabin without the approval 
of the Forest Service; they cannot reside in their cabin on a 
year round basis and they cannot deny others access to the land 
on which the cabin is built. In contrast, a cabin owner on 
private land can live in the cabin year round, subdivide the 
land, install a swimming pool hot tub or sauna, cut down old 
trees and plant new ones. The cabin owner cannot make these 
types of improvements to the actual facility on Forest Service 
land. These factors should be taken into consideration in the 
appraisal process--but under the current process, they are not.
    A second major concern is how the traditional objectives of 
the Forest Service are changing under the new appraisal 
process. Families have dominated recreational residences. Some 
of these families are older, some younger and some span 
generations, but the existence of families, many from 
relatively modest economic backgrounds, enhance the mission of 
the Forest Service to provide for the public at large. A 
dramatic and rapid fee increase diminishes the family 
atmosphere of the areas. Public lands exist for the enjoyment 
of a broad spectrum of Americans and dramatic fee increases 
hurt this objective.
    In each of the last two years, Congress enacted stopgap 
measures through the Interior Appropriations Subcommittee, on 
which I serve, to increase the fee rates gradually while we 
could develop a long-term solution. I believe the legislation I 
introduce today will provide for such a permanent solution to 
the problem. For that reason, on November 10, 1999 I introduced 
H.R. 3327, the Cabin User Fee Fairness Act. This bill will 
establish a new appraisal process to determine a fair fee for 
the value of the use of the lot to the cabin owner. Under the 
formula established by my legislation, appraisals will based on 
the raw value of the land, adjusted for structures and services 
provided by the U.S. Forest Service. While my legislation may 
not be perfect, I believe it is a step toward finding a fair 
way to address the discrepancies in user fees across the 
country.
    Thank you again Madame Chairman for the opportunity to 
testify and I look forward to working with you on this 
legislation.

    Ms. Chenoweth-Hage. Thank you, Mr. Nethercutt.
    The Chair would recognize the second panel now for their 
testimony. By unanimous consent, I request that Representative 
Nethercutt be given the permission to sit on the Subcommittee, 
if you have time.
    Mr. Nethercutt. I would be glad to.
    Ms. Chenoweth-Hage. All right, thank you. And now I will 
introduce our second panel. I am just thrilled to be able to 
introduce an acquaintance of mine, Mr. David Mead, president of 
the Sawtooth Forest Cabin Owners' Association of Twin Falls, 
ID; Ms. Mary Clarke Ver Hoef, National Forest Homeowners of 
Sacramento, CA.
    Ms. Ver Hoef, it is my understanding that your son is in 
the audience today and I would like to take a moment here to 
welcome Logan. Logan, would you stand, please? Welcome, Logan. 
I really want you to know how much I appreciate your Mom's work 
on this issue. Thank you for letting us have her. And now last, 
but not least, I would like to introduce Mr. Richard Betts of 
Betts & Associates in Berkeley, CA.
    As explained in the hearings that we have had before on 
this Committee is the intention of the Chair to place all 
witnesses under the oath. This is a formality of the Committee 
and not at all intended to inhibit any testimony, but to assure 
open and honest discussion of the witnesses. I believe that all 
witnesses were informed of this before appearing here today and 
that you have each been provided a copy of the Committee rules. 
Now if you will please stand and raise your hand?
    [Witnesses sworn.]
    Thank you. The Chair recognizes Mr. David Mead.

 STATEMENT OF DAVID R. MEAD, PRESIDENT, SAWTOOTH FOREST CABIN 
              OWNERS' ASSOCIATION, TWIN FALLS, ID

    Mr. Mead. Madam Chairman, I am David Mead of Twin Falls, 
south central Idaho. As a country banker, now retired and an 
accredited rural appraiser, retired member now of the American 
Society of Farm Managers and Rural Appraisers, I am here today 
to testify in support of H.R. 3327, the Fairness Act of Cabins.
    I am here today as president volunteer of Idaho's Sawtooth 
Forest Cabin Owners' Association. My special use permit allows 
me a cabin on a half acre lot of raw, native, undeveloped land 
on one of the tracts in the forest. National average lot size 
is about one quarter of an acre. That means all cabins take up 
only about 4,000 acres within the 192 million acres on the 
national forest lands. These cabin lots are not for sale. This 
is not a real estate transaction. These are not second homes. 
Our Sawtooth Forest cabin lots were reappraised in 1996, some 
of the first in the Nation. We were stunned by the results. 
Fees in our tract increased over 540 percent from $390 per 
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. Most of us got second 
appraisals for it was evident that the Forest Service's first 
appraisal was based on the cabin lots being fully developed 
within legally subdivided neighborhoods as fee simple 
properties, not as raw, undeveloped, natural, native lots 
without improvements as stated in the Forest Service policy.
    My small log cabin my family built has no electricity or 
plumbing or phone. We have an outhouse and carry our water in a 
bucket from a creek up the hill. This bill will provide relief 
to some 15,000 cabin owners in 25 States and Puerto Rico who 
mostly, suddenly face alarmingly and exceedingly high permit 
fees.
    In our high profile cabin area, the Pettit Lake Cabin 
Tract, new fees are scheduled to go from around $1,100 a year, 
too low, to from between $22,500 a year up to $67,500 a year. 
These permits contain many Forest Service restrictions on our 
use of the lot and I have attached a list of these to my 
written testimony. The cabin permit is one, among other 
documents, that must be read to understand the values of 
positives and negatives 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 quickly 
learn that there is no inclination within the Agency to solve 
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 report. It appears that only further guidance 
from Congress will succeed in sorting out the conflicting 
objectives the Forest Service faces. On the one hand, Congress 
and the GAO has directed resource agencies to maximize revenues 
from the Federal lands and in so doing, the agency has 
contrived a system that now will capture more than the fair 
market value of 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 programs, the cabin program, authorized by 
Congress in 1915.
    The 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 cabin fees. You 
can see from the large easel we have over here, we Forest 
Service cabin owners have very few rights compared to the 
private owners. One of the biggest differences is that we 
cannot prevent public access on our lots, except within our 
cabins. It is only that and two other limitations on our chart 
that were originally to be covered by the 5 percent factor. As 
a banker type, I will leave with one fundamental professional 
observation. Assuming credit worthiness, I would approve a 
mortgage to an owner or prospective buyer of a fee simple 
parcel, but even assuming vast riches, no banker would grant 
mortgages for the assets that is a cabin authorized on forest 
land under this program.
    Thank you for support of this Fairness Act to Cabins. Thank 
you Madam Chairman and Committee.
    [The prepared statement of Mr. Mead follows:]
    [GRAPHIC] [TIFF OMITTED] T5462.001
    
    [GRAPHIC] [TIFF OMITTED] T5462.002
    
    [GRAPHIC] [TIFF OMITTED] T5462.003
    
    [GRAPHIC] [TIFF OMITTED] T5462.004
    
    [GRAPHIC] [TIFF OMITTED] T5462.005
    
    [GRAPHIC] [TIFF OMITTED] T5462.006
    
    [GRAPHIC] [TIFF OMITTED] T5462.007
    
    [GRAPHIC] [TIFF OMITTED] T5462.008
    
    [GRAPHIC] [TIFF OMITTED] T5462.009
    
    [GRAPHIC] [TIFF OMITTED] T5462.010
    
    [GRAPHIC] [TIFF OMITTED] T5462.011
    
    [GRAPHIC] [TIFF OMITTED] T5462.012
    
    [GRAPHIC] [TIFF OMITTED] T5462.013
    
    [GRAPHIC] [TIFF OMITTED] T5462.014
    
    [GRAPHIC] [TIFF OMITTED] T5462.015
    
    [GRAPHIC] [TIFF OMITTED] T5462.016
    
    [GRAPHIC] [TIFF OMITTED] T5462.017
    
    [GRAPHIC] [TIFF OMITTED] T5462.018
    
    [GRAPHIC] [TIFF OMITTED] T5462.019
    
    [GRAPHIC] [TIFF OMITTED] T5462.020
    
    [GRAPHIC] [TIFF OMITTED] T5462.021
    
    [GRAPHIC] [TIFF OMITTED] T5462.022
    
    [GRAPHIC] [TIFF OMITTED] T5462.023
    
    [GRAPHIC] [TIFF OMITTED] T5462.024
    
    [GRAPHIC] [TIFF OMITTED] T5462.025
    
    [GRAPHIC] [TIFF OMITTED] T5462.026
    
    Mrs. Chenoweth-Hage. Thank you, Mr. Mead.
    The Chair was negligent in not reminding the witnesses that 
their testimony is limited to 5 minutes. We do have a light 
system here. The green light means go and just like in traffic 
lights, the yellow light means step on it and speed up and the 
red light means stop.
    So with that, Ms. Ver Hoef is recognized for her testimony.

STATEMENT OF MARY CLARKE VER HOEF, CHAIR, GOVERNMENTAL LIAISON 
     COMMITTEE, NATIONAL FOREST HOMEOWNERS, SACRAMENTO, CA

    Ms. Ver Hoef. Thank you, Madam Chairman. My name is Mary 
Clarke Ver Hoef. On behalf of the National Forest Homeowners, 
thank you very much for the opportunity to address you today.
    The cabin program provides more recreation visitor days per 
acre than any other use of the National Forest System. Because 
of the nature of the recreation provided, it also 
overwhelmingly provides the greatest recreation opportunity to 
the retired, the elderly and the disabled. Because of the 
nature of the cabin experience, these cabins are overwhelmingly 
also a family experience.
    Cabin owners already pay their fair share and more. We pay 
the highest use fees per acre of any of the many users of the 
national forest lands. Remember, we also already pay taxes, 
separate and distinct from these fees. 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's 
currently proposed fees, cabin owners would be paying an 
average of over $8,000 per acre. Because we cannot restrict or 
prohibit public use of our lots as Mr. Mead pointed out, the 
actual permitted area over which we have control consists only 
of the footprint of our cabin. By any real world real estate 
standard, this footprint already pays 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 forests.
    Now 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. 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 for our use, but 
many of the resulting fees are not.
    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 consistent 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 appraisal is used to reach a base amount from 
which to derive a fair fee, a fair market fee. The current 
system, the way it is now, is aimed at appraising the permitted 
lot as if it were being offered for sale.
    To do the appraisal step properly, to reach that use fee, 
for each typical lot or lots in a tract of cabins, an appraiser 
must identify sales of comparable, privately-held parcels in 
the same geographic area.
    In order to implement the policy this time around, the 
Forest Service prepared a new set of guidelines for appraisers. 
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 lot's value. Further, there are 
places in which 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, have had an unusual inflationary pressure 
on the local land which requires an adjustment to this method 
of finding a fair fee so as to result in a fair fee. In order 
for us to do this, we do have to do something different.
    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 a simple vacation home on a subdivided lot in a 
resort location. It is aimed at producing a reasonable and fair 
fee for the cabin use. The bill includes specific detailed 
requirements for the appraiser and is written in language an 
appraiser can understand. It calls for appraisal every 10 years 
instead of 20 years to make sure the Forest Service is getting 
the 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 values, but not one tied to urban 
use.
    In those circumstances where certain governmental acts 
produce an unfair fee using this procedure, 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 state-wide index instead of a local one.
    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.
    Thank you.
    [The prepared statement of Ms. Ver Hoef follows:]
    [GRAPHIC] [TIFF OMITTED] T5462.027
    
    [GRAPHIC] [TIFF OMITTED] T5462.028
    
    [GRAPHIC] [TIFF OMITTED] T5462.029
    
    [GRAPHIC] [TIFF OMITTED] T5462.030
    
    [GRAPHIC] [TIFF OMITTED] T5462.031
    
    [GRAPHIC] [TIFF OMITTED] T5462.032
    
    [GRAPHIC] [TIFF OMITTED] T5462.033
    
    [GRAPHIC] [TIFF OMITTED] T5462.034
    
    [GRAPHIC] [TIFF OMITTED] T5462.035
    
    [GRAPHIC] [TIFF OMITTED] T5462.036
    
    Ms. Chenoweth-Hage. Thank you very much.
    The Chair now recognizes Mr. Betts for testimony.

     STATEMENT OF RICHARD M. BETTS, MAI, ASA, SRA, BETTS & 
                    ASSOCIATES, BERKLEY, CA

    Mr. Betts. My name is Richard Betts and I am a California 
State Certified General Appraiser and the partner in Betts & 
Associates in Berkeley, CA. I appreciate the opportunity to 
present to the Subcommittee my analysis of the problems 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 market-value appraisal methodology and instructions 
employed by the Forest Service. I am being compensated by the 
Coalition for my appearance today, but the Coalition has 
exercised no control over my statement, nor whatever replies I 
might offer in response to questions from the Subcommittee.
    I would describe myself as a very active appraiser, 
specializing in complex properties and complex situations. I 
have had more than 35 years of experience in appraisal and real 
estate economics consulting. I will skip talking about my 
background to get to the meat of this.
    In conducting my analysis, I reviewed some 16 key 
documents, including the Forest Service Recreation Residence 
Authorization Policy, sections of the Forest Service Handbook, 
a number of memoranda and correspondence and I have also 
examined in detail the initial appraisal reports and several 
second appraisal reports from cabin tracts in Idaho, Oregon and 
California.
    The primary focus of my analysis, as I indicated, was upon 
the market-value appraisal process itself, including the 
instructions and their implementation. Unquestionably, major 
work is needed to clarify the instructions, to remove material 
that is contrary to the adopted policy and to guide appraisers 
to proper practice in this very complex and unusual setting.
    I have identified four major problem areas. The first and 
the major problem area is in the definition of the property 
being appraised. The 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. Because the Forest Service material is relatively general 
in wording, regional instructions also vary.
    A second major problem is with adjustments for access and 
utilities, which usually were provided by the permittee, but 
are incorrectly handled in Forest Service instructions and in 
appraisals. In most cases, the cabin owners put in all of the 
effort and management and took all of the risks associated with 
developing access and utilities and the cabin itself. Forest 
Service language leads the Forest Service to capture the cabin 
owners' investment in these utilities and access and the 
portion of value that results from the cabin owners' effort and 
risk taking.
    In addition, the current instructions put the burden of 
proof on the cabin owners to document who paid for 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, which is, basically, the first step 
in the appraisal process, as we define it.
    The fourth problem was the adjustment of the market data 
for relevant differences, something that is a necessary step in 
every appraisal. In general, examples include appraisers 
adjusting for the existence of lot access or utility systems or 
building improvements and they would correctly use the 
depreciated current replacement cost of the improvements, but 
apparently without adjustment for the extra costs involved in 
construction in more remote locations, without allowance for 
the noncontractor--cost elements that impact value, which we 
are bound by our code of ethics to consider, and using 
depreciation procedures that do not reflect the real economic 
lives of such improvements.
    In conclusion, I am quite convinced by my study of the 
completed appraisal reports that there is a major problem. The 
bill, I believe, will lead to fairer and better appraisals of 
market value. We have had the opportunity to consult with 
representatives of the Appraisal Institute and others, to see 
if there are any wording changes that will try to tweak the 
bill still better, and we are interested in doing that.
    Thank you, Madam Chairman.
    [The prepared statement of Mr. Betts follows:]
    [GRAPHIC] [TIFF OMITTED] T5462.054
    
    [GRAPHIC] [TIFF OMITTED] T5462.055
    
    [GRAPHIC] [TIFF OMITTED] T5462.056
    
    [GRAPHIC] [TIFF OMITTED] T5462.057
    
    [GRAPHIC] [TIFF OMITTED] T5462.058
    
    [GRAPHIC] [TIFF OMITTED] T5462.059
    
    [GRAPHIC] [TIFF OMITTED] T5462.060
    
    [GRAPHIC] [TIFF OMITTED] T5462.061
    
    [GRAPHIC] [TIFF OMITTED] T5462.062
    
    [GRAPHIC] [TIFF OMITTED] T5462.063
    
    [GRAPHIC] [TIFF OMITTED] T5462.064
    
    [GRAPHIC] [TIFF OMITTED] T5462.065
    
    [GRAPHIC] [TIFF OMITTED] T5462.066
    
    [GRAPHIC] [TIFF OMITTED] T5462.067
    
    [GRAPHIC] [TIFF OMITTED] T5462.068
    
    [GRAPHIC] [TIFF OMITTED] T5462.069
    
    [GRAPHIC] [TIFF OMITTED] T5462.070
    
    [GRAPHIC] [TIFF OMITTED] T5462.071
    
    [GRAPHIC] [TIFF OMITTED] T5462.072
    
    [GRAPHIC] [TIFF OMITTED] T5462.073
    
    [GRAPHIC] [TIFF OMITTED] T5462.074
    
    [GRAPHIC] [TIFF OMITTED] T5462.075
    
    [GRAPHIC] [TIFF OMITTED] T5462.076
    
    Ms. Chenoweth-Hage. Thank you, Mr. Betts.
    Mr. Smith, you are recognized for questions.
    Mr. Smith. I have no questions.
    Ms. Chenoweth-Hage. Thank you. Mr. Schaffer, you are 
recognized for questions.
    Mr. Schaffer. Thank you, Madam Chairman. Let me just kind 
of think out loud with your help and assistance about this 
whole process.
    The references have been made often that the history on 
these cabin leases go back to 1915. There seems to be somewhat 
of a nostalgic connection because 1915 was a long time ago and 
we have done this for a long time. It was about the time we got 
income taxes and about the time the Federal Reserve Board was 
created, so a lot of other decisions have negative impacts on 
the country. So I am not particularly persuaded just by the--
because we have been doing this for a long time. The conflict 
that we struggle with all the time, is the desire to have large 
national estate for the benefit of the country and to utilize 
the value of these lands, a decision that was made in the last 
century.
    And so now we find ourselves trying to--struggling with our 
desire to have the benefits of the marketplace superimposed on 
the impracticality of a socialized asset that belongs to all of 
the country and this is a hard thing we do. We tried to do this 
with the utilities and transportation and all the rest. We 
always fight over it. There is never really a good answer, but 
we can try to be as fair as we can. I think that is the goal of 
the Nethercutt bill that is before us.
    My question, I guess, is does the fee, do the fees that are 
charged, do they have any relationship at all to the cost 
associated with managing and maintaining and providing the 
services that these cabins require? Presumably, putting a 
permanent cabin in a national forest is just slightly different 
than me setting up my tent over a weekend backpacking trip. I 
just pack it up and take it with me, you leave your dwelling 
there permanently rather and so I presume there should be some 
proportional costs where you would pay more than I do as a 
taxpayer and citizen to use the lands that we own in common.
    It seems that determining the value of that expense, the 
extent to that expense should be somewhat associated with the 
costs associated with using it and really nothing more. I do 
not pay more if I decide to stay in a campsite for 7 days 
versus 1 day. The Forest Service charges me the same as the 
taxpayer. In fact, they do not even know I am there half the 
time, but what role does the cost to the Forest Service to have 
that cabin there play in determining the fee?
    Ms. Ver Hoef. If I might attempt to address this issue. 
First, I am going to assume that the American public wants to 
see different forms of recreation on Federal lands. This is one 
type of recreation. You noted that you can stay in your 
campground for fairly small amount per night. Recognize that it 
cost the Federal Government a lot of money to put up that 
campground and the concrete vault toilets. They are $200,000 
toilets. The cost, the current cost of putting in a campground 
are very high. The cost of the cabin program has not been great 
to the Federal Government because all of the improvements were 
supposed to be and generally are those of a cabin owner.
    Mr. Schaffer. So the dollars raised off the fee, how much 
in excess are they than the cost of actually maintaining these 
leases?
    Ms. Ver Hoef. Off the top of my head I think I have that in 
my testimony, the Forest Service at one of the last testimonies 
came up with a $3 million figure for the cost of administering 
the program. Before the current round of appraisals we bring in 
$9 million. It could go up to $22 million and more with the 
current stuff. So we more than pay our way. This is, of course, 
not assuming that they want to charge us for every last little 
bit of the forest planning process that might approach dealing 
with recreation. There are ways to play with those figures, 
obviously, but we are cost-effective. This does not even deal 
with those issues, where my tract is where we spend a lot of 
time working with the Forest Service in managing all the public 
uses that come through there. We man the kiosk. We help them 
with putting together trails, so there is a lot of incidental 
helpfulness that we provide.
    Mr. Schaffer. Thank you, Madam Chairman.
    Ms. Chenoweth-Hage. Ms. Napolitano.
    Ms. Napolitano. Thank you again, Madam Chair. In listening 
to the testimony, especially Mr. Mead, I was rather intrigued 
by the fact that you do not have some of the amenities inside 
the cabin.
    Is the cost of what you are paying to Forestry, the same as 
other cabins who might have those amenities in them on their 
property, inside their cabin?
    Mr. Mead. There are 34 cabin lots in the Valley View tract 
where my cabin is. There is one typical which means we all pay 
the same fee. Some of the people in my tract are just like I 
am, they do not want all the modern. We want to get away from 
it. We use kerosene lamps, et cetera. We have a one holer and 
all that. And there are some who have electricity and indoor 
plumbing and a well. They do not have to use a bucket like we 
do. This is pretty much the same all over the Nation, all the 
tracts I have seen and everybody I have talked with. There are 
some people who go a little fancier than we do, but we all pay 
the same fee within the tract, in our tract. Another tract 
nearby, about 5 miles away by the road, there are three 
typicals, one by the lake, one a little back from the lake and 
one further back from the lake.
    Ms. Napolitano. And they all pay the same?
    Mr. Mead. No, those three typicals, each one of those are 
appraised differently, different value and therefore the time 
is a 5 percent factor comes up with a different amount. For 
instance, I mentioned the Pettit Lake tract, low will be paying 
$22,500. That is the low end. That goes up to about $30,000 to 
$38,000 on the second typical and then the third typical which 
is by itself, $67,500 a year. Well, most of those cabins were 
not obviously sold or taken down. I do not know whether you 
realize, if the cabins are abandoned, we have to take them 
down.
    Ms. Napolitano. You own them.
    Mr. Mead. That is right and we have to take them down or 
the Forest Service takes them down. They bill us.
    Ms. Napolitano. Is there any other, Ms. Ver Hoef, you 
indicated that you pay property taxes in addition to this user 
fee.
    Ms. Ver Hoef. Right.
    Ms. Napolitano. Generally, what are the property taxes 
going for?
    Ms. Ver Hoef. Well, I am in California. I pay about $500 a 
year for property taxes. I also have a lake, I am not on the 
lake. I am back from the lake, but I have a tract that is 
around a lake. I am one of the few that does not have the pit 
toilet. When Logan was born I really wanted to be indoors and 
my husband set up, it is basically a pit system that gets 
pumped, but most people there do not have running water either.
    Remember, that is not something the Forest Service 
provides.
    Ms. Napolitano. I understand.
    Ms. Ver Hoef. So you are only looking at the underlying raw 
land so you are classifying based on the land itself. If you 
are back from the lake----
    Ms. Napolitano. The footprint itself, where you are 
located.
    Ms. Ver Hoef. Well, no, it is the site. The site or the 
lot. For ease of allowing an appraiser to look at this, you 
give him a lot to look at and in the market place a lot on a 
lake goes for more than a lot away from the lake. So you can 
classify a typical lot along there, along the lake and one back 
and that is the--you are appraising the sites, the places for 
them and not the amenities. You are supposed to be having raw, 
undeveloped land be appraised.
    Ms. Napolitano. I understand. Now you did make one 
statement in that you said this was used for, it was one type 
of recreation. Do you have the ability to rent or lease?
    Ms. Ver Hoef. Generally, the permit provides a limitation 
on that. I think it is maybe 2 weeks. You have to get prior 
permission from the Forest Service. I do not know anybody who 
has actually ever done that. It just does not happen.
    Ms. Napolitano. So it does not come in as a second income 
to the cabin owner?
    Ms. Ver Hoef. No. It is quantitatively and qualitatively 
different from your typical vacation home. It is a totally 
different animal.
    Ms. Napolitano. It is also my understanding that there have 
not been any new permits issued for a number of years.
    Ms. Ver Hoef. That is correct.
    Ms. Napolitano. How do we allow other Americans to be able 
to participate?
    Ms. Ver Hoef. I would love to see that happen. One of the 
things that we have seen is every time I come and have to write 
something for one of these things, I have to cross out the 
number of current cabins available. Each year they go down 
significantly. No one in the Forest Service is making any 
attempt to replace them at all, so you can say, ``Oh, we only 
take out a few a year,'' which is what the Forest Service will 
say, but there has been a steady decline of these cabins.
    In 1962, in California alone, there were about 15,000. Now 
there are only 6,000 left in California. In 1988, there were 
15,600, according to Forest Service written documents. Now 
there are about 14,800 and I guess to ask me how we change 
that, you obviously know, as far as my personal opinion, that 
there are plenty of places in the vast forests that we have 
where these things could be appropriate, where they would not 
bother anybody, but you are going to have to address that issue 
to the Forest Service, I am afraid. That is not something I can 
do anything about.
    Ms. Napolitano. Thank you.
    Ms. Chenoweth-Hage. Thank you. Mr. Smith.
    Mr. Smith. Yes. I apologize Madam Chair. I actually have to 
leave. This question is really more for the Forest Service than 
the appraisers. I was just hoping they could address it.
    In flipping through the bill, I had a hard time 
understanding it to be perfectly honest with you, even though I 
am a lawyer. And what I am curious about is if you could 
testify, you are certainly free to answer the question as well, 
what specifically in the bill changes the appraisal value? 
There is a whole lot of talk about things that they need to 
consider which allegedly they already do consider, but there 
have been estimates that have been made that it is going to 
dramatically change the value and both sides agree on that 
point.
    What I am curious about is what specifically, what page, 
what line, what words are going to result in the lower value 
being estimated?
    Ms. Ver Hoef. Can I clarify something here? We are not 
looking for lower values. We are not aimed at lower values. We 
are aimed at having them do it right. And we think if they do 
it right, we will end up with some fees we can live with that 
are fair to both the American public and to the cabin owner.
    Mr. Smith. OK. It is a rhetorical point----
    Ms. Ver Hoef. Nevertheless----
    Mr. Smith. The point is you want lower fees because you 
think the ones currently arrived at are too high.
    Ms. Ver Hoef. Some of them are OK. One of the things the 
bill does provide is that if you do not have a problem with 
your current one, you do not have to redo it. Some of them are 
OK. It is very interesting because we have seen in some lakes, 
the fees come in totally reasonable and the appraisal is done 
right. In other places, they are not.
    Mr. Smith. The problem is it being too much. I do not think 
there is a lot of cabin owners coming forward saying that is 
too low, they are not being fair.
    Ms. Ver Hoef. We have had those discussions, be fair.
    Mr. Smith. At any rate, what I am interested in is what in 
the bill, where, on what page, what does it say that is going 
to reduce the fees and you do not have to parse that out right 
now. To the Forest Service, if you cannot answer it right now 
either, if you can just submit something to my office so that--
--
    Ms. Ver Hoef. Probably do not have time to do that right 
now, but I can do that for you. As we said, it was attempted to 
be written for appraisers and I have some legal background also 
and I had to use appraisal experts to figure out how to do it.
    Mr. Smith. OK, thank you very much. Thank you, Madam Chair, 
I appreciate your indulgence.
    Ms. Chenoweth-Hage. I wanted to refer back to part of Mr. 
Mead's testimony and my initial question. I believe that you 
stated the total national acreage that was involved with cabins 
is 5,000 acres out of 192 million acres?
    Mr. Mead. Between 4,000 and 5,000 acres, that is right, a 
rather small spot on the millions of acres in the forest. Many 
people, Madam Chairman, feel that the cabins are taking up too 
much space. You will also get sometimes the Forest Service 
person saying that, the cabins are taking up too much area. And 
yet when you show even the Forest Service person, what do you 
mean? Here in the Sawtooth Forest we have very few acres, 
nationally 4 to 5, probably more like 4,000 acres out of 191, 
192 million acres. Now we are only in 25 States and Puerto 
Rico, but there are only probably that many States that have 
national forests too.
    Ms. Chenoweth-Hage. Does not that calibrate out to about 1/
500,000th of the total land base?
    Mr. Mead. I think it is point zero two thousandths percent.
    Ms. Chenoweth-Hage. OK.
    Mr. Mead. In other words, we are not talking about much 
land. And as Mary has testified and said, I think the Forest 
Service says that the expenses are $3.5 million to administer 
the program and I think we had $9.8 million a couple of years 
ago, the Forest Service testified came in, so we are more than 
paying the expenses and we would want to pay the expenses. We 
are taxpayers. We are part of the public.
    Ms. Chenoweth-Hage. Mr. Mead, are all the fees going up or 
are some going down? What has been your experience?
    Mr. Mead. No, all the fees are not going up. And all of the 
appraisals have not been made. I forget what the Forest 
Service, 65 percent, I think Mary says yesterday the Forest 
Service testified, 63 percent are done. That means there is 
still a lot to be done. Some of those high peaks that will be 
coming in from now on have not been done. There are places 
where the appraisals have gone down. Even in the Sawtooth 
Forest, well, nothing went down in the Sawtooth Forest, but 
some went up much less on the Nevada line than they did up 
north, the SNRA, the Sawtooth National Recreation Area.
    Part of that, on the other forests going down it, as Mary 
has suggested, is that the appraiser, the standards that were 
set up by the Forest Service are so--definitions and the way it 
was done, it was not done right by one appraiser and he got 
maybe a spike, and the other appraiser, second appraiser, 
looked at it in a little different light and it went down.
    Now there is one who has been with the Forest Service for 1 
year on Pettit Lake and they still have not made a decision. 
That appraiser is looking at it and defining what the Forest 
Service says because it is not very plain. That is why this 
bill has standards in it and asks the national appraising 
organization to come up with better standards. Standards are 
not really in here. That has got to be done. In other words, do 
it right, we say. Do it right, Forest Service.
    Ms. Chenoweth-Hage. Thank you, Mr. Mead. I wanted to ask 
Mary, to the best of your knowledge, do the cabin owners ever 
really formally agree to the use of 5 percent of the appraised 
value of the cabin lot to determine the user fee? Where did 
they get that 5 percent?
    Ms. Ver Hoef. That is a hard question to answer. I did--no, 
we did not agree to any 5 percent. I included a copy of a 
statement in my testimony by three remaining members of the 
Chiefs Committee who were around at the time that the original 
underlying policy was created. There are no Forest Service 
members that are left in the agency. This is their recollection 
of what actually happened and what everybody thought they were 
doing at the time. The bill is an attempt to get back to where 
they thought we were. The 5 percent was capitalization rate, 
was basically something that was dictated by the agency. It was 
not agreed to. Further, the joint statement that I have 
attached goes in specific detail into every one of those things 
that we have heard over recent years, the Forest Service saying 
we have agreed to this. The problem is they have changed what 
they are doing from what was originally our understanding and 
everybody else's understanding at the time. There is nobody 
left in the Forest Service from then.
    Ms. Chenoweth-Hage. Well, they want to compare values of 
the cabins on Forest Service lands to those values held in 
private property.
    Ms. Ver Hoef. And rentals and they come up with a 
percentage that they think is equivalent to a standard rental 
and 5 percent being lower.
    Ms. Chenoweth-Hage. Tell me, what is the ad valorem tax 
rate for private property in California?
    Ms. Ver Hoef. I do not know. I think it is a lot less.
    Mr. Betts. It is 1 percent, the ceiling, except for bonds, 
amortization of bonds that are specifically authorized by the 
voters.
    Ms. Ver Hoef. Now, we do not pay a real property tax in 
California. We pay a possessory use tax in California. I have 
personal experience with the local appraisers there. They do 
not know what they are taxing. So if you go--I suspect having 
talked with Mr. Mead about this, that if you go from State to 
State, the appraisers--I know for a fact that appraisers from 
State to State are appraising different things. Assessors, 
thank you, are appraising or looking at or assessing different 
things. And they have varying degrees of understanding of what 
this particular cabin is.
    I know that when I got my first bill it said real property 
tax and I said wait a minute, called them up and they said, 
``Oh, we do not have any other forms, we just put it on 
there.''
    Ms. Chenoweth-Hage. Well, I know that the ad valorem tax 
rate in Idaho is 1 percent. Some of the counties bump it up a 
little higher than that, but the difference between 1 percent 
and 5 percent, even after the valuation is completed is 
enormous.
    I do want to let the witnesses know that we will go for a 
second round of questions and so the Chair would recognize Mr. 
Schaffer.
    Mr. Schaffer. I have to admit I was reading something here 
and I only caught the last part. So you pay a possessory 
interest tax on these lands. It is not really a property tax.
    Ms. Ver Hoef. It is theoretically, although my little bit 
breaks it down for Sheriff and for the hospitals and the 
various different things, schools, although this is not my--I 
am not allowed to have this as my primary residence.
    As I said, they really do not know what they have, but by 
law, it is supposed to be the possessory interest tax and I 
took a seminar on that once just to figure out what it is and 
you better not ask me. I know how the formula works and it 
ended up being the same as my fee that year.
    Mr. Schaffer. I rewrote Colorado's possessory interest laws 
when I was in the State Senate back home and it is a pretty 
complicated topic and nobody is sure whether it is right or 
not, it is just the best you can do.
    I want to go back to the philosophy of having the 
Government be in the real estate business and in the 
management, whether that is even a good idea in the first 
place, I do not think it is. I am for national forests, but I 
am not for having Federal Government be a landlord to 
Americans. That just seems at cross purposes from my way of 
thinking.
    Nonetheless, we have got these Federal lands and there are 
people who rent or lease the space to put their property on it.
    Ms. Ver Hoef. Permit.
    Mr. Schaffer. You lease the permit.
    Ms. Ver Hoef. We get a special use permit, so we are a 
permittee.
    Mr. Schaffer. So you are permitted for a temporary period 
of time to put your property on the Government's land?
    Ms. Ver Hoef. Yes.
    Mr. Schaffer. Now if we really wanted to arrive at a fair 
market value, I guess we would be talking about the Federal 
Government selling these lands for the value that they believe 
they are worth?
    Ms. Ver Hoef. I think you have got to distinguish the fair 
market value, what is fair for this particular kind of use 
where the Federal Government provides a spot. Just like your 
spot for a tent.
    Mr. Schaffer. Right.
    Ms. Ver Hoef. But in those cases they provide a lot of 
underlying things you are probably not aware of when you put 
your tent in.
    Mr. Schaffer. Well, when I go in the back country which is 
what I usually do, you just hop on a trail and set it up where, 
you follow the rules and I am only paying to the extent that I 
am a taxpayer, through my income taxes in that case.
    Ms. Ver Hoef. And we all pay income tax too.
    Mr. Schaffer. Yes.
    Ms. Ver Hoef. It is different and distinct from the fair 
market value of land. We just happen to be using this mechanism 
to back into a fee that is geographically relevant for a cabin 
in Idaho as opposed to Tennessee as opposed to California and 
that is where people get confused. They keep saying fair market 
value, fair market value. Well, this is a particular odd duck 
of use by the American public as a recreation use. I get to 
keep my tent up longer than you do. I get to keep my tent up 
for 20 years. If at the end of the 20 years the Federal 
Government decides they want to use it for something else, they 
want to put the campground there. They want to just have it as 
visual clear corridor, then I have to remove everything and 
restore it to its natural and native State that changes kind of 
the feeling you have about having----
    Mr. Schaffer. I guess I am trying to explore what are the 
legitimate charges for which the--legitimate charges the 
Government should be charging lease holders for versus I guess 
what you are willing to concede to.
    Ms. Ver Hoef. It is a balancing act, is it not?
    Mr. Schaffer. It is because as I say it is a questionable 
thing here. This is a property that we all, as Americans own 
collectively and we are trying to figure out how to have you 
pay fairly. So there is a cost of actually maintaining and 
providing whatever services that are required. You got to cover 
that.
    What else should we pay for in addition to the actual cost 
of letting you enjoy the national forest, just like I do when I 
hop on a trail and set up my tent out in the middle of nowhere?
    What other expenses should you have to pay?
    Ms. Ver Hoef. Well, currently proposed is a cost recovery 
kind of fee which will be involved with a small fee for 
administering, for actually doing the paperwork on issuing a 
new permit at the end of a 20-year cycle if they decide to 
issue that.
    Mr. Schaffer. But we are talking on management and 
regulatory costs that are necessary just to accommodate----
    Ms. Ver Hoef. Right, everything else is generally our 
expense. If there is a plowed road, it is usually because there 
is a campground or some other use. They are never plowing for 
us. Those sort of things get done by cabin owners, if we are 
allowed to. I know in Idaho, they are prohibited from plowing 
because that would get in the way of a cross country trail that 
occurs in the winter.
    So it is different from--it is quite different from what 
you are thinking about in terms of the cost because there is 
not a whole lot of cost. We have our resource officer come to 
our meetings once every 6 months and he comes and we talk and 
we generally sit down and figure out what planned projects he 
might have this year. We worked on a bridge that they needed to 
build. So I do not know how you figure that that is a cost to 
the Government because what we are really doing is doing what 
we have always been pushing for over the last 10 years, work in 
partnership with the Forest Service to come up with help that 
is useful for administration of that particular area by the 
Forest Service.
    Ms. Chenoweth-Hage. I thank the gentleman. The Chair 
recognizes Ms. Napolitano.
    Ms. Napolitano. Thank you once more, Madam Chair. Very 
interesting because it is a very different type of issue that I 
am used to dealing with. In fact, having sat on city council 
and there is property fees involved and there is all kinds of 
issues that emanate from that.
    I guess one of the things I am hearing is that there is an 
issue with the fair market value versus the fair market fee is 
what fits your particular, the cabin users fee issue versus the 
fair market fee and that that is something that I am really 
beginning to try to grasp to see how do you deal with the 
issues that you are dealing with, because you are paying 
property tax, although albeit it is not what normal people 
would pay who live in a home and own it.
    Ms. Ver Hoef. Actually, it is the same amount.
    Ms. Napolitano. No, because the property value would be 
much less.
    Ms. Ver Hoef. No, because I am thinking of other real 
property I know of and it is about the same.
    Ms. Napolitano. I am talking about regular home owner. 
Unless your prior Prop. 13 in L.A. in California, your taxes 
are exceedingly high, I would say in the $2,000 to $3,000 range 
per month. Post-Prop. 13.
    Mr. Betts. If you have the same situation, in other words 
if you get by the restrictions of Prop. 13 because we are 
talking about a recently transferred cabin site on the one 
hand, versus a recently transferred private home that is 
nearby, same size, they are going to be about the same amount.
    Ms. Napolitano. You are talking about cabins. I am talking 
about property owners.
    Ms. Napolitano. I paid $50,000 for my cabin in 1985. I paid 
$500 a year. That is 1 percent.
    Ms. Napolitano. What I am saying is the property value of 
that footprint of your cabin is worth $50,000, so you pay 1 
percent of that whereas I may have land that my footprint sits 
on and I am paying three times as much or so. There are certain 
differences and you are right, I own it and that is something 
else. Again, you choose to be there and that is fine. That is 
not a problem. But I am looking at the fair market value versus 
the fee. And I would like to ask the Forest Service when they 
come up how much of this is going to be--how much money are 
they talking about? How many cabins are involved? Because you 
pointed out that some of the cabins do not have a problem with 
their fee because it is not exorbitant or the increase was not 
such that it is making a terrible dent and as was mentioned 
before, they are not saying, ``Well, my fees are real low, 
increase them.''
    So what is the disparity? How can we begin to come to the 
middle to understand and assist, but I think the Forest Service 
needs to answer some questions in regard to what their future 
look at other cabins and are they--you are saying you are 
losing cabins, yet if they really are looking to allow other 
Americans throughout the areas where these cabins are to come 
in and be able to purchase cabins, then how do we deal with the 
problem because they are going to come in at a higher level and 
they may not be able to afford it. So how do we come to the 
middle? How do we begin to work so that you do get some 
assistance in addressing your issue and your problem and help 
others be able in future to understand that they are coming in 
to an area and they better know up front that this may be an 
issue later on for them as you either increase, for whatever 
reason.
    Do you follow what I am trying to get?
    Mr. Betts. Yes. I would suggest that, of course, there is 
first off the philosophical question that Mr. Schaffer has 
suggested, which is the issue of whether one charges a fee 
based on costs or charges a fee based on market value. In my 
work for the Coalition, I have only been working with the issue 
of market value, so I get to bypass that very interesting 
question that he has posed.
    There is the issue with market value that, if you can get 
it right, it is at least an equitable independent outside gauge 
that can be applied to all alike, and I think that basically 
the point that we are trying for with this bill, is to correct 
serious problems, in my opinion, in the administration of the 
appraisal portion of the fee-setting process, because it is a 
two-step process, The appraisal is the first step, to estimate 
market value, and then the 5 percent fee, is charged on that 
market value as the license fee, and we are not trying to 
change that. That is also loaded with some really difficult 
philosophical questions, inside that 5 percent fee, but that is 
not on this discussion, only the market value is fundamentally 
what is being addressed with this bill.
    Ms. Napolitano. I am really concerned and Madam Chair, just 
a last statement is that we are charged with making sure that 
the taxpayer is protected and I wanted to be sure that all 
taxpayers are protected and not just one faction of them.
    Mr. Betts. Absolutely.
    Ms. Chenoweth-Hage. I thank the lady. I have some 
questions. I will direct my questions primarily to Mr. Betts, 
but I do want to ask Mr. Mead and Ms. Ver Hoef first about some 
testimony that we received when we held a hearing a Cordelain a 
couple of years ago. We received testimony from a Mr. Adrian De 
Vries and I doubt that you can see this, but he entered into 
the record a picture of his little cabin and believe me it is a 
humble little cabin and I would like to pass this to the 
Members and for this cabin he is being charged by the Forest 
Service $1,076 a year in fees. But in addition to that, the 
County charges an assessment of $78.58 for just county 
business. He is also taxed $23.54 for the jail override. He is 
also taxed $91.96 for School District No. 82 and then the 
school override. He is charged an $11.50 additional tax. Now 
for counties, roads and bridges he is charged $31.88 in taxes 
from the County. For hospital, he is charged $5.74. For the 
library, he is charged $12.12 for a total of $255 a year and 
then for solid waste, he is charged $95 a year. How often do 
the solid waste trucks come out to your cabin, Mr. Mead and 
pick up garbage and carry it back?
    Mr. Mead. Zero, Madam Chairman.
    Ms. Chenoweth-Hage. Mary.
    Ms. Ver Hoef. Zero. We pay for garbage removal.
    Mr. Mead. We pay $41 to Blaine County. They just started 
this year. Some people--we have to take the trash out, just 
like a camper, we take the trash away from our cabin. Some 
people dump it at the Smythe Creek store in a dumpster provided 
by a private contractor. The Forest Service allows it to be 
there.
    Ms. Chenoweth-Hage. And is that close to your cabin?
    Mr. Mead. Five miles.
    Ms. Chenoweth-Hage. Is that typical for most cabin owners?
    Mr. Mead. Oh yes, every one of us has to carry. Nobody 
burns and nobody dumps. We all have to either take it home, 
which I generally do. I do not even stop at Smythe Creek Store 
generally.
    Ms. Chenoweth-Hage. But like Mr. De Vries, he is being 
charged $95 a year for solid waste disposal just like all the 
other private property owners.
    Mr. Mead. If that cabin is in Idaho, the lot is in Idaho 
too, we are charged by the county as a personal property tax, 
not as a real estate property tax. We pay personal--they charge 
us personal property because we own the cabin. And by the way, 
I have got pictures if anybody wants to see them. That looks 
like my cabin up there. But the Forest Service, and this is 
very easy to mix up, the Forest Service does not appraise our 
cabin. You could have and I think in the Los Angeles area there 
are some castles on some Forest Service land, cabin land, but 
the Forest Service is only charging you for the use of the lot 
and they are not appraising that building whatsoever.
    Ms. Chenoweth-Hage. Mr. De Vries is also being charged for 
roads and bridges. How often is it that the county comes out 
and plows out the roads and fixes up the bumps.
    Mr. Mead. Never.
    Ms. Chenoweth-Hage. Mr. Betts, I have some questions for 
you. What factors are not being considered specifically by the 
Forest Service in its appraisals that will be addressed in this 
bill?
    Mr. Betts. Madam Chairman, I believe the major, one of the 
major issues is the failure to consider what appraisers call 
the entrepreneurial incentive, which is when you adjust for a 
cost-based difference between a transaction that is sold and 
the property that you are appraising, you need to look not only 
at the cost of putting, for example, the utilities on that lot, 
but also the risk that the person faced in doing that. So there 
is a risk allowance and there is a profit allowance, and those 
are part of appraisers' routine procedures everywhere, but the 
Forest Service apparently holds to the belief that they are 
improper here.
    The second problem has to do with this issue that I 
mentioned, of describing or selecting the right type of 
properties. What are you appraising? Some of the appraisals 
that I have reviewed essentially handled these lots as if they 
were finished, subdivided lots. And they are not. They simply 
are not. Most of them had no access, no utilities. They simply 
are a spot in the middle of a meadow and that makes them a very 
different beast in the world of economics and the appraisal 
language that is being used; particularly, some of the 
memoranda, simply does not reflect that correctly.
    Ms. Chenoweth-Hage. So, am I correct in assuming that it is 
your position that the process the Forest Service uses right 
now defeats the purpose of reaching a real fair market value?
    Mr. Betts. Yes, precisely.
    Ms. Chenoweth-Hage. And do you think that H.R. 3327 gets us 
closer to the fair market value--the process that will lead to 
fair market value?
    Mr. Betts. I am comfortable that it will get us closer, 
yes.
    Ms. Chenoweth-Hage. That is good. Well, I want to thank 
this panel for your outstanding testimony and will have other 
questions that we will submit to you in writing. Thank you all 
for coming so far and delivering such valuable testimony.
    Ms. Ver Hoef. Thank you, Madam Chair.
    Ms. Chenoweth-Hage. The Chair now recognizes the third 
panel. Mr. Schultz, on behalf of the Appraisal Foundation in 
Washington, DC., Mr. Paul Brouha, Associate Deputy Chief, 
National Forest Service System here in Washington, DC.; 
accompanied by Mr. Randy Karstaedt, Special Uses Program 
Manager, and Mr. Paul Tittman, Chief Appraiser.
    Gentlemen, I thank you for attending the hearing and now if 
you will please stand and raise your hand to the square?
    [Witnesses sworn.]
    Mr. Schultz, you are recognized for your testimony.

    STATEMENT OF J. CARL SCHULTZ, THE APPRAISAL FOUNDATION, 
                        WASHINGTON, DC.

    Mr. Schultz. Thank you, Madam Chair. I want to thank you 
for the invitation to appear before the Subcommittee on Forest 
and Forest Health this morning, this afternoon, actually. It 
was supposed to be this morning, I understand. My name is Carl 
Schultz. I am from Atlanta, GA and I am a general certified 
appraiser in nine States throughout the southeastern United 
States and have developed and taught numerous appraisal 
courses. I am also the past chair of the Board of Trustees of 
the Appraisal Foundation and a former national president of the 
Appraisal Institute.
    I am here today on behalf of the Appraisal Foundation, a 
nonprofit educational organization headquartered here in 
Washington. The Appraisal Foundation was founded in 1987 by the 
leading appraisal organizations of the United States to promote 
professionalism in appraising. It accomplishes this through two 
independent boards, the Appraisal Standards Board and the 
Appraisal Qualifications Board. I wish to emphasize to the 
Committee that these two boards are independent and I am not 
here speaking for either one, the Standards Board or the 
Qualifications Board. I am here on behalf of the Foundation 
itself.
    The Appraisal Standards Board promulgates and generally 
recognizes performance standards for appraisers which are known 
as the uniform standards of professional appraisal practice. 
The Appraisal Qualifications Board establishes minimal 
qualification criteria for certified appraisers in areas of 
education, experience and State examinations.
    What makes the Appraisal Foundation unique is the public 
responsibility bestowed upon it by Congress as mandated by the 
Federal Financial Institutions Reform, Recovery and Enforcement 
Act of 1989. The Appraisal Foundation plays an important role 
in the real estate appraiser regulatory system. All State real 
estate appraisal boards are required to use at a minimum the 
standards and qualifications established by the boards of the 
Foundation.
    Last fall, the Foundation entered into a contract with the 
United States Forest Service to perform an independent 
evaluation of its appraisal policies and procedures. The 
evaluation which has been conducted over the past 4 months is 
nearly complete. An evaluation team appointed by the Foundation 
performed the review and I served as the team leader.
    As part of the overall evaluation, several weeks ago we 
were specifically asked to review the policy relating to cabin 
permit fees. The existing policy entitled ``Required 
Specifications for Present Recreation Resident Sites'' is 
contained in Chapter 6.9, Exhibit 6 of the Forest Service 
Handbook. In addition, we had available House Bill 3327, 
several appraisals prepared for the Forest Service and 
permittee and information submitted by appraisers engaged by 
the permittee associations.
    In reviewing the policy of Chapter 6.9, Exhibit 6 of the 
Forest Service Handbook, the members of our evaluation team 
were unable to completely understand the meaning of some of the 
instructions. Accordingly, we believe the instructions related 
to the appraisal of recreation resident sites needs to be 
clarified.
    It is also our opinion that this lack of clarity is the 
primary reason for the current divergence in the valuations of 
these properties. We will be making specific recommendations to 
the Forest Service to clarify the instructions. Our 
recommendations will include clearly stating what interest is 
to be appraised as well as what improvements either onsite or 
offsite ought to be considered in the appraisal.
    In addition, it needs to be established whether the site or 
the entire tract is in its native and natural undeveloped State 
for purposes of the appraisal.
    Turning to H.R. 3327, I want to emphasize that the 
Appraisal Foundation neither endorses nor opposes the 
legislation. The purpose of our appearance before the 
Subcommittee today is to provide you with information relating 
specifically to Section 6 of the bill.
    In reviewing Section 6 appraisals, subsection (b) we have 
serious concerns about the proposed specific appraisal 
guidelines. The terminology used in the legislation and 
restriction on the comparable properties an appraiser may 
consider are inconsistent with generally recognized appraisal 
practice. Dictating changes to the methodology or approaches to 
the appraisal process will have a direct impact on the 
appraisal. Based on our review of the proposed legislation, an 
appraiser will not be able to develop a credible market value 
estimate. In our opinion, this legislation is not necessary if 
Chapter 6.9 is clarified. If Congress deems that a legislative 
remedy is necessary, we believe it should concentrate on the 
specifics of the property to be appraised and the purpose of 
the appraisal, rather than the appraisal process. Simply 
stated, the focus needs to be on what is being appraised rather 
than how it should be appraised. We can sympathize with the 
financial burden being faced by the cabin owners, but modifying 
traditional appraisal techniques is not the appropriate 
resolution. Perhaps thought should be given to further reducing 
the renewal period and/or modifying the 5 percent. However, 
because these particular issues are more of what we call public 
policy matters, we are not making specific recommendations.
    Madam Chair, I appreciate having the opportunity to appear 
before the Subcommittee. I hope you and your colleagues in 
Congress will not hesitate to use the Appraisal Foundation in 
areas of appraisal evaluation as you see fit and I would be 
pleased to answer any questions you may have.
    [The prepared statement of Mr. Schultz follows:]
    [GRAPHIC] [TIFF OMITTED] T5462.077
    
    [GRAPHIC] [TIFF OMITTED] T5462.078
    
    [GRAPHIC] [TIFF OMITTED] T5462.079
    
    [GRAPHIC] [TIFF OMITTED] T5462.080
    
    [GRAPHIC] [TIFF OMITTED] T5462.081
    
    [GRAPHIC] [TIFF OMITTED] T5462.082
    
    [GRAPHIC] [TIFF OMITTED] T5462.083
    
    [GRAPHIC] [TIFF OMITTED] T5462.084
    
    [GRAPHIC] [TIFF OMITTED] T5462.085
    
    [GRAPHIC] [TIFF OMITTED] T5462.086
    
    Ms. Chenoweth-Hage. Thank you very much, Mr. Schultz.
    The Chair recognizes Mr. Brouha for his testimony.

  STATEMENT OF PAUL BROUHA, ASSOCIATE DEPUTY CHIEF, NATIONAL 
               FOREST SYSTEM, U.S. FOREST SERVICE

    Mr. Brouha. Madam Chairman and Members of the Subcommittee, 
good afternoon. I am accompanied by Randy Karstaedt, our chief 
Forest Service Special Uses Program manager, and by Paul 
Tittman our chief appraiser. Enactment of H.R. 3327 would 
replace the recreation residence fee policy for the 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 a national 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 H.R. 3327 and I will 
address three of my most specific concerns in the testimony.
    First, let me give you some background. In 1908, we 
established cabin tracts and issued special use term permits 
for cabin owners. Owners were charged annual rent representing 
the market value of the land at that time. The permit fee is 
only for the site. It is not related to the value of the 
structure. As was noted, the Forest Service grants this 
privilege only to approximately 15,200 owners nationwide. In 
the 1980's, the Forest Service worked closely with the public 
and permit holders in revising our recreation 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. Ninety-six percent of them were permit 
holders or associations for holders. Eighty-five percent 
responded favorably. The regulations were subsequently 
published and adopted in 1988.
    The terms and conditions of every permit direct the lots be 
appraised at least every 20 years. In 1996, we started a 5-year 
effort to appraise the fee simple value of all lots. We will 
complete appraisals in the next 2 years, using the same 
appraisal specifications and procedures today that were set in 
1988.
    For the record, I would like to include several charts 
displaying changes nationally as well as in several States in 
annual rental fees resulting from the appraisals. The national 
information resulted 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 dramatic increases of more 
than 500 percent. The remainder will see significant increases 
averaging a tripling of their fee. Now keep in mind this is 
based on annual appraisals that were done more than 20 years 
ago, not annual appraisals, but market appraisals.
    We realize that a sudden rise in user fees can be a 
hardship for some summer residence owners. Therefore, once the 
appraisal is completed, we phase in increases that exceed 100 
percent over a 3-year period. Also, increases in recreation 
residence fees will be implemented in Fiscal Year 2000 only to 
the extent that they do not exceed 1999 fees by $2,000.
    In addition, no fee can be increased any sooner than 1 year 
from the time the Forest Service has notified the holder of the 
results of the appraisal.
    At this time, our appraisal procedures are being evaluated 
by the Appraisal Foundation as we have already heard from Mr. 
Schultz. This is the governing body over all appraisal 
practices and we have no reason to believe that the general 
process will not be accepted as professionally supported. We do 
agree, however, because the standards have changed since 1988, 
that there is room for improvement.
    Mr. Chairman, let me now briefly discuss our objections to 
the legislation. First, H.R. 3327 would exempt the permit fee 
from fair market value provisions and existing law and 
regulations. The Congress and the Administration have a long-
standing policy that the people of the United States receive 
not a fair fee, but fair market value for the use of public 
lands and resources. Based on our analysis, we estimate that 
the fair fee of H.R. 3327, would result in return to the 
Treasury of between $8 and $12 million less than fair market 
value annually. That has already been noted. 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 based on appraisals on land values that were done more 
than 20 years ago.
    Second, the fair fee would be different from a fair market 
value rental fee and 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 of similar properties cannot 
lead to a fair outcome, but rather only to a subsidized result. 
That is not fair, although it is likely to be welcomed by the 
permit holders.
    Moreover, the standard for setting fees would thus be 
different than the standard by which the Forest Service 
assesses and collects fees from those who hold permits and 
easements for the 130 other types of special uses occurring on 
the national forests and grasslands.
    By exempting recreation residence permit holders from the 
principle of fair market value rental fees this bill would set 
a precedent for other user groups to follow.
    Third, H.R. 3327 would create a 4- to 5-year period of 
disruption and inequity in the assessment and collection of 
fees through recreation residence uses because the bill would 
require the Secretary to contract with a professional appraisal 
organization to develop appraisal guidelines and promulgating 
new regulations could take several years.
    In the interim, the transition fees that would be imposed 
are broken down into several different methodologies which has 
the potential to be inequitable among the users at this time.
    H.R. 3327 would suspend all current appraisals pending 
promulgation of those new regulations and we basically would be 
forced to likely redo much of what we have done. Most of the $4 
million spent on appraisals since 1996 would be lost if the 
bill were enacted. In addition, we estimate a $500,000 cost to 
develop new guidelines and regulations. After that, most of the 
9,600 folks who have already had appraisals completed would 
likely request another appraisal which would cost in the range 
of $3 to $4 million.
    Ms. Chenoweth-Hage. Mr. Brouha, I am going to have to ask 
you to wrap up your testimony because we have a vote pending. I 
also want to advise you that we will have to adjourn the 
hearing after you have concluded your testimony.
    Mr. Brouha. I have just a few more remarks, Madam.
    Ms. Chenoweth-Hage. We have a vote pending and we have very 
little time left. So I need to ask you to submit the rest of 
your testimony in writing, Mr. Brouha. I have never had to do 
this, but I have just been advised that the Speaker has asked 
for a certain process on the floor and then all Republicans 
will be asked to meet with the Speaker.
    So I, unfortunately, will not be able to attend my own 
hearing and Mr. Schaffer will not be able to return. So your 
entire testimony will be submitted in the record and we do have 
a number of questions that we will be sending to you in 
writing, Mr. Brouha and Mr. Schultz. We will be submitting 
those within the next day or two. Today is Thursday. They will 
probably be in the mail to you by Friday. We would appreciate 
your answers within 10 working days. As you know, the hearing 
record will remain open for 10 working days and should anyone 
who has given testimony wish to amend their testimony, please 
do so within that 10-day-period.
    This is somewhat unusual and I am very sorry, but I want to 
thank you for all the time that you have spent in the hearing 
and at this time this hearing is adjourned.
    Thank you.
    The prepared statement of Mr. Brouha follows:]

   Statement of Paul Brouha, Associate Deputy Chief, National Forest 
    System, Forest Service, United States Department of Agriculture

    Madam Chairman and Members of the Subcommittee:
    Thank you for the opportunity to discuss H.R. 3327, the 
``Cabin User Fee Fairness Act of 1999.'' I am accompanied by 
Randy Karstaedt, Forest Service Special Uses Program Manager, 
and Paul Tittman, Forest Service Chief Appraiser.
    Enactment of H.R. 3327 would replace the recreation 
residence fee policy for National Forest System lands and 
direct the Secretary of Agriculture to establish a set of 
guidelines for arriving at an annual fee for the privilege to 
use and occupy a National Forest recreation residence lot. H.R. 
3327 identifies specific, technical provisions to be included 
in those guidelines. The 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 H.R. 3327. I will 
address three of our most significant concerns in my testimony. 
First, let me give some background.
    The Forest Service has encouraged people to use the 
national forests since 1908. We encouraged them to recreate, 
watch for fires, render emergency aid, and report damages or 
abuse of forest resources. We established cabin tracts and 
issued special use term permits for cabin owners. Owners were 
charged an annual rent representing the market value of the 
land at that time. This permit allowed the holder to build a 
structure for recreational purposes, not to be used as a 
permanent full-time residence. The permit fee is only for the 
site, it is not related to the value of the structure. The 
Forest Service grants this privilege only to approximately 
15,200 cabin owners nationwide.
    In the 1980's, the Forest Service worked closely with the 
public and permit holders, including the National Forest 
Homeowners in revising our recreation residence policy, 
including the manner in which we determine and assess fair 
market rental fee. In 1987, the Forest Service published for 
public review and comment proposed revisions to its appraisal 
and fee determination procedures and policies for recreation 
residence uses. Nearly 3,200 respondents commented on the 
proposed regulations, 96 percent of whom were permit holders or 
associations of holders. Eighty-five percent of those who 
commented responded favorably to our proposed appraisal 
procedures. The regulations were subsequently published and 
adopted in 1988.
    The terms and conditions of every recreation residence 
special use permit direct that recreation residence lots be 
appraised at least every 20 years. In 1996, we started a 5 year 
effort to appraise the fee simple value of all 15,200 of our 
recreation residence lots. We will complete appraisals for all 
of those lots within the next 2 years. We are using the same 
appraisal specifications and procedures today that were set in 
1988.
    For the record, I would like to include several charts 
displaying the changes nationally, as well as in several 
states, in annual rental fees resulting from appraisals that 
have been completed to date. The national information is the 
result of completed appraisals that affect approximately 9,600 
recreation residence lots, or about 63 percent of the total. 
More than 58 percent of our holders will be experiencing either 
a decrease in their annual rental fee, or relatively moderate 
increases. Less than 3 percent will experience dramatic fee 
increases of more than 5 times the current fee being paid. The 
remainder will see less dramatic but still significant 
increases that, on average, will result in an approximate 
tripling of their current annual rental fee. Note that the 
changes in fee amounts shown in the charts are cumulative 
averages.
    We realize that a sudden rise in user fees can be a 
hardship for some summer residence owners. Therefore, once the 
appraisal is completed, in accord with Sec. 343 of Public Law 
105-83, we phase in fee increases that exceed 100 percent over 
a three-year period. Also, in accord with Sec. 342 of the 
Department of Interior and Related Agencies Appropriations Act, 
2000, increases In recreation residence fees will be 
implemented in FY 2000 only to the extent they do not exceed FY 
1999 fees by $2000. In addition, no fee can be increased any 
sooner than one year from the time the Forest Service has 
notified the holder of the results of the appraisal. It is also 
our policy to allow the permit holder to get a second appraisal 
if they disagree with the results of the first appraisal. If 
necessary, our policy allows for a third appraisal when there 
is an unresolved disagreement in value.
    Many of the permit holders who are most concerned with our 
appraisals occupy lots with high-appraised values, or will 
experience significant increases in their land use rental fees. 
At this time, we have contracted with the Appraisal Foundation, 
the governing body over all appraisal practices carried out by 
licensed appraisers in the United States, to evaluate our 
appraisal specifications for recreation residences. I would be 
happy to provide a copy of the Foundation's findings to the 
Subcommittee when it is available.
    Mr. Chairman, I will now briefly discuss our objections to 
the legislation.
    First, H.R. 3327 would exempt the permit fee for a 
recreation residence cabin owner from the fair market value 
provisions in existing law and regulation. The Congress and the 
Administration have had a longstanding policy that the people 
of the United States receive not just a ``fair'' fee, but fair 
market value for the use of public lands and resources. The 
current recreation residence fee policy and procedures that the 
Forest Service are now implementing were developed to do what 
Congress has directed us to do: to assess and collect land use 
rental fees for special uses based on the fair market value of 
the rights and privileges granted to the holders of our 
authorizations.
    Based on our preliminary analysis of the valuation 
procedures specified in this legislation, we estimate that the 
``fair fee'' H.R. 3327 proposes to establish would result in a 
return to the Treasury of fees that are between $8 and $12 
million less than fair market value annually. 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 based on appraisals of land values that are now more than 
20 years old.
    Second, the ``fair-fee'' that would be established by H.R. 
3327 for recreation residence special uses would be different 
than a fair market value rental fee. In a market economy, we 
rely upon 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 
only a subsidized result. That is not ``fair,'' although it is 
likely very welcome by permit holders.
    Moreover, the standard for setting fees would thus be 
different than the standard by which the Forest Service 
assesses and collects fees from those who hold permits and 
easements for the 130 other types of special uses occurring on 
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.
    If H.R. 3327 were to become law, it would encourage other 
users of National Forest System lands to seek comparable 
statutory authorities that would similarly exempt them from 
land use rental fees based on the principles of fair market 
value. The communications, oil and gas pipeline, outfitting/
guiding, and commercial filming industries, along with other 
user organizations, might well seek similar downward 
adjustments in their own user fees to satisfy their particular 
economic interests at a time when the Forest Service is 
criticized for failing to charge sufficient fees for the use of 
the public land.
    H.R. 3327 would create a 4-5 year period of disruption and 
inequity in the assessment and collection of fees for 
recreation residence uses. H.R. 3327 would require the 
Secretary to contract with a professional appraisal 
organization to develop appraisal guidelines that would include 
the specific, technical provisions provided in section 6(b) of 
the Bill. We estimate that the procedures needed to develop the 
guidelines proposed in H.R. 3327 would take more than a year to 
complete. Before the Forest Service could adopt those 
guidelines, they would be subject to public notice and comment, 
and Congressional review. Promulgating regulations could take 
several years.
    H.R. 3327 would suspend all current recreation residence 
appraisal activities pending the promulgation of those new 
regulations. In addition, H.R. 3327 would provide all permit 
holders who have already had their lot or tract appraised by 
the Forest Service the opportunity to request a new appraisal 
anytime within a 2-year period following the Secretary's 
promulgation of new regulations.
    In the interim, H.R. 3327 proposes three options for the 
Forest Service to assess what are characterized as ``transition 
fees.'' The manner in which H.R. 3327 proposes to assess 
transition fees would create fee inequities between permit 
holders occupying comparably valued lots during the 4-5 year 
transition period.
    Since 1996, the Forest Service has spent $3.5 million of 
appropriated funds completing recreation residence appraisals. 
Another $500,000 is being spent on ongoing appraisals. Most of 
this $4 million investment would be lost if H.R. 3327 were 
enacted.
    In addition, we estimate it would cost the Forest Service 
$500,000 to develop the appraisal guidelines and regulations 
directed in this Bill. After that, we estimate that more than 
90 percent of the 9,600 permit holders who occupy lots affected 
by appraisals that the Forest Service has already completed 
would take advantage of the opportunity provided in this Bill 
and request another appraisal. In satisfying those requests, 
the agency could spend more than $3-4 million in another round 
of appraisals.
    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 their public lands.
    The appraisals we have completed confirm that the value of 
the National Forest System land being occupied by recreation 
residences has increased over the last 20 years. For some lots, 
with particularly desirable amenities, that value has increased 
significantly. We are implementing our fee policy in a manner 
consistent with Federal laws, agency management direction, and 
sound management principals concerning fair market rental fees 
for these uses 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 this opportunity to testify on 
H.R. 3327. We would be pleased to answer any questions you may 
have, particularly on other, more technical, concerns with the 
legislation.
[GRAPHIC] [TIFF OMITTED] T5462.083

[GRAPHIC] [TIFF OMITTED] T5462.084

[GRAPHIC] [TIFF OMITTED] T5462.086

[GRAPHIC] [TIFF OMITTED] T5462.087

[GRAPHIC] [TIFF OMITTED] T5462.088

[GRAPHIC] [TIFF OMITTED] T5462.089

[GRAPHIC] [TIFF OMITTED] T5462.090

[GRAPHIC] [TIFF OMITTED] T5462.091

    [Whereupon, at 3:52 p.m., the Subcommittee was adjourned.]
  

                                

```