Review of the Fees Charged by the Forest Service, Department of Agriculture, for Recreation-Residence-Site Permits on National Forest Lands

Published by the Government Accountability Office on 1971-11-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                            COMPTROLLER     GENERAL     OF      THE   UNITED   STATES
                                          WASHINGTON.    D.C.     20548

    r' Dear Mr. Wyatt:                                                                  lllllllllllllllllllllllllllllllllllllll

             Reference is made to your letter                 to us c r:ed July 13,
       1971, requesting    us to/review        the fees. chargsda-the                   Forest --
                                                                                  _-- ..&_&%HW
   I                                 griculture,         fp' . .,.__,
                                                                    -_^_----                      -              >I
 I   simemits -M^-I_Con national*fZZ?Gk~$.l                          You requested       that
     we consider   sugsesti~~s~~~~~~~-~.~~~-tter                     to you dated June 14,
     1971, by Mr. Lamar Tooze  .~ --  of    Portland,         Oregon,        who had a per-
     mit for a recreation-residence              site    in the Metolius            River
     recreation  unit    in the Deschutes           National           Forest.

            Because the issues       raised     by Mr. Tooze in his June 1971
     letter    are similar     to issues     considered       in our past audits
     of the Forest      Service's    recreation-residence-site            program,   we
     are enclosing      copies of the following           audit   reports    for your

             1. Review of         Recreation      and Other Selected    Land Use Ac-
                tivities,         Forest    Service,   Department    of Agriculture
                 (B-125053,        Mar. 28, 1963).

             2. Follow-up    Review of Adjustments      Made in Fees Charged
                for Summer-home Sites on National          Forest    Lands, For-
                est Service,     Department  of Agriculture       (B-152490,
                Jan. 18, 1966).

            In response        to your request,         we reviewed       the Forest      Ser-
     vice's    most recent        fee determination         for the recreation-
     residence      sites    in the Metolius         River recreation          unit.     Our
     review was directed            toward obtaining         information       regarding
     the comments or suggestions             made by Mr. Tooze in his June
     1971 letter.         We reviewed      pertinent       policies      and procedures,
     land appraisal        reports,      and other records          pertaining       to the
     Forest    Service's       fee determination          and interviewed         Forest
     Service    officials        and the private        land appraiser         involved    in

      'These permits     were formerly      called    summer-home-site                           permits.
        The Forest   Service    defines    a recreation      residence                         as a pri-
        vately  owned dwelling,       on national     forest
        used for recreation      purposes.

                                   50TH ANNIVERSARY                   1921- 1971

the determination.        We also    visited      the Metolius      River   rec-
reation  unit.


        The act of March 4, 1915, as amended              (16 U.S.C.     497),
authorizes      the Secretary     of Agriculture     to    issue permits
 (leases)    for use and occupancy       of national       forest   land for
constructing       or maintaining    summer houses        and other    struc-

        The act does not set forth       criteria   for determining     the
amounts of the fees to be charged for the permits              but autho-
rizes    the Secretary      to establish   such regulations,     terms,   and
conditions     as he may deem proper.         The Secretary  has estab-
lished     the policy    that the fees,    the amounts of which shall
be prescribed       by the Chief of the Forest      Service,   should be
commensurate      with the value of the use authorized         by the per-            2
mit (36 CFR 251.3).
        The Secretary's    policy    is in accord with the Government-
wide policy     on user charges prescribed        by the Office       of Man-        %
agement and Budget in Circular            A-25, September    23, 1959, as
amended, which states       that    (1) a fair   market value should be              iis?
obtained    when federally      owned resources     or properties      are          s
leased or sold and (2) charges            are to be determined      by the ap-      a
plication     of sound business      management principles        and, so far       22
as practicable      and feasible,      are to be in accordance        with          cl
comparable     commercial   practices.                                              G
       Forest   Service   policy  and procedures    provide,     in deter-          m
mining   fees   for sites    to be used as recreation      residences,

      --The rental      and sale    value      of comparable     private    lands
         be considered.

      --An annual fee of 5 percent      of the value             of comparable
         private   lands used for similar    purposes            be considered
         a fair  rental,  subject to a minimum fee               of $25 a year.



       --Fees ordinarily      be redetermined         every 5 years,            but,
          when a redetermination       results      in an increase             of $75
          or more a year,     the increase     will      take effect           on a
          progressive    basis over a 3-year period.

       Additional       background information      on the recreation-
residence-site        program and related      Forest  Service    policies
and procedures        is contained   in the two enclosed       reports     on
our prior      reviews.

       In his June 1971 letter,          Mr. Tooze explained        that the
Forest   Service     had progressively       increased     his fee from $15
a year in 1946 to $225 a year in 1971 and that he had been
unsuccessful      in appealing     the matter       to the Regional      Forester
at Portland,      the Department       of Agriculture’s       Board of Forest
Appeals,     the Chief of the Forest         Service,     and the Secretary
of Agriculture.        Mr. Tooze stated        that the Forest      Service     had
proposed     to increase    the annual fee to $259 in 1972, $292 in
1973, and $325 in 1974.           These increases        were proposed       by the
Forest   Service     in 1971 as a result         of a private     appraisal.

        In support     of his view that the       proposed         increases      were
totally    out of    line,   Mr. Tooze stated       that:

       --The value of the sites   was due primarily   to the im-
          provements  that had been made by the permittees    and
          not because of anything  that represented   a Government

       --The 5-percent   rate applied   to the fair  market value of
          the sites  to establish   the amount of the annual fee
          should be reduced by one half    in view of the fact that
          the occupancy  of the cabins was for only a portion     of
          the year.

       Information     regarding     these   matters    follows.


        The fair    market values     used by the Forest    Service  as the
bases for computing         the proposed   increased   fees for the sites
at the Metolius        River recreation    unit were established     for
the land only and did not include            increases   in values  due to
structural      improvements    made by the permittees.

       The Forest     Service      employed a private           appraiser    in De-
cember 1970 to determine            the fair     market value of the sites
at the Metolius       River recreation          unit.       Market data included
in the appraiser's         report     indicated       that sales prices        of com-
parable   private     land in central          Oregon ranged from $66 to
 $85 a riverfront       foot and that a sales price               of $7,000 for a
lot was not uncommon.             The appraisal         report   stated   that com-
parable    riverfront      lots had sold rapidly.

       The appraiser     concluded     that $65 a riverfront        foot--
which was below the $66 to $85 range indicated                by the market
data used by the appraiser         --was the fair     market value for the
Metolius    River sites.      At $65 a riverfront       foot,   the average
fair   market value for each lot amounted to about $6,500.                      In
discussing     his appraisal     with us, the appraiser        stated      that
his estimate      of the fair    market value of the sites          applied       to
the land only and did not include            the increased     values      due to
the residences      or other    improvements    made by the permittees.

        The appraiser's        report      was reviewed     and approved      by
Forest    Service    officials        at the Deschutes        National    Forest  and
at the Portland        Regional       Office.     An official       at the regional
office    noted that the assignment              of a market value lower than
the sales-price        range of the comparable            properties      was a con-
servative     but defensible          approach.

      A strict  application      of a market value of $65 a river-
front  foot would have resulted       in many different      fee rates
for the several    sites    at the Metolius    River because of vari-
ances in the sizes of the sites.          Forest   Service   policy,   how-
ever, provides   that the fees for several         sites   in the same


tract  be as uniform    as possible.      Therefore     instead   of ap-
plying  a value of $65 a riverfront         foot to each site,      offi-
cials  at the Deschutes     National   Forest    adjusted     the market
values   to arrive   at four separate     fee rates     for the many
sites  at the Metolius     River recreation      unit.

      As Mr. Tooze stated         in his letter,     this resulted     in a
proposed   fee of $259 in       1972, $292 in 1973 and $325 in 1974
for his permit.      If the     Forest    Service  had strictly     applied
the appraised   value of       $65 a riverfront      foot  to his site,
which has a frontage      of    110 feet,     the proposed     fee would have
been $269 in 1972, $313         in 1973, and $357 in 1974.


       Mr. Tooze commented that the S-percent           rate used by the
Forest    Service  to compute the amount of the fee should be
reduced by one half because the cabins were occupied                only
part of the year;      however,   a permit  entitles      the holder     to
exclusive     use of the property    as a recreation-residence           site.
Cabins constructed      by the permittees    occupy the sites        through-
out the duration     of the permits.

       In some cases the use of the cabins          by the permittees
can be limited      by poor access during       the winter.   Under For -
est Service    procedures,    however,   limited    access to the prop-
erty is considered      in the appraisal      of the fair   market value
of the land and therefore       should not have a bearing        on the
percentage    applied   to the fair    market value to compute the
amount of the fee.

      With   regard   to access    the   appraisal   report   stated   that:

      “The subject    property  is probably      the more desir-
      able recreation     river front    in the State of Oregon
      because of its convenient       location     to Portland     and
      the other major cities      in the Willamette        Valley   and
      also to the major communities          of central    Oregon.
      There is good access from the highway into the Camp


        Sherman        area which     is the            central       point   of   the
        Metolius         River recreation               area.     ***‘I

       We were advised      by Forest      Service     representatives            and
by one of the permit        holders    that    access     to the Metolius
River   sites     during the winter      was not significantly             difficult
and that      some of the permit      holders      used their       cabins      year-

         In past        reviews     we observed       that     the 5-percent           rate     used
for    establishing            the amounts       of the fees was less              than     the
rate     used by private            landowners      who leased         similar       properties.
Information           obtained      in our current         review      showed      that     the
rental      rates       charged     by two private         companies        for    recreation-
residence         sites      in the State        of Washington         exceeded        6 percent
of market        value.          One of these      companies,        unlike      the Forest
Service,        charged        an initial      fee of from        $1,500       to $2,800        for
the permits.

         We believe        that     the Forest        Service’s        policies        and proce-
dures     with     respect      to fees      for    recreation-residence-site                     per-
mits     are consistent           with    the Government-wide                policy,       as
prescribed         by the Office          of Management           and Budget,          for     leas-
ing or selling           federally        owned resources            or property.             On the
basis      of the information             described        above,      we believe          that       such
policies       and procedures            were appropriately             followed         in setting
the fees       for    the sites        at the Metolius            River     recreation           unit
and that       the market         data    obtained       in the appraisal              of those
sites     was conservatively              applied.

       As previously          stated      the law governing              the use of na-
tional    forest        land  for    recreation-residence                sites    does not
set forth      criteria       for    establishing          rental      rates.       We noted
that   the Board          of Forest      Appeals,       in its      decision      to uphold
the previous         fee determination             which     was appealed         by
Mr. Tooze and other             Metolius       River      permittees,          had stated


     "In view of the fact that the public lands of the
     United States belong to all of our citizens,     we think
     that a fee policy under which summer borne site per-
     mittees would pay less than a fair r-eturn for the ex-
     clusive use of their sites is more appropriately     for
     adoption by legislative  action rather than by execu-
     tive decision."

     We are returning the copy of Mr. Tooze's        letter   which
you enclosed with your request.

                                Sincerely   yours,

                          Depu%yComptroller General
                               of the United States

Enclosures   - 3

The Honorable Wendell Wyatt
House of Representatives