oversight

National Park Service: Land Acquisition at the Cumberland Island National Seashore, Georgia

Published by the Government Accountability Office on 1997-09-29.

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

      United States
GAO   General Accounting  Office
      Washington, D.C. 20548

      Resources, Community,   and
      Economic Development    Division
      B-278106
      September 29, 1997

      The Honorable Ralph Regula
      Chairman, Subcommittee on Interior
      Committee on Appropriations
      House of Representatives

      The Honorable Jack Kingston
      House of Representatives

      Subject: National Park Service: Land Acauisition at the Cumberland Island
               National Seashore, Georgia

      Following your July 30, 1997, request, we agreed to perform a limited review
      of your concerns about the acquisition of the Greyheld tract by the Nation&
      Park Service (NPS). The 1,148-acre private tract within the boundaries of the
      Cumberland Island National Seashore is the largest remaining parcel of land
      to be acquired for the seashore. You asked the following questions:

      -   How was the price determined for the Greyfield tract?

      -   Are normal procedures being used to acquire the Greyfield tract?

      -   Does federal legislation establishing the seashore or its wilderness area
          prevent development of this private property if not purchased by NPS?

      -   Will there be additional costs for security at the Navy’s Kings Bay
          Submarine Base if this property is developed?

      On September 24, 1997, we briefed you on the results of our review and
      agreed to provide you with this report summarizing our findings. In brief, the
      following are our answers to the specific questions you raised:

      -   An appraisal was used to determine the price for the Greyfield tract, as
          required.

      -   There was nothing unusual about the acquisition procedures used.


                                     GAO/RCED-97-251R   Cumberland   Island   Land Acquisition
B-278106
-       The legislation concerning Cumberland Island does not preclude the
        development of the Greyfield tract.

-       The need for additional security at the Navy base will depend on the
        increase in boat traffic.

On the basis of our work, we are concerned about the second appraisal of the
Greyfield tract, which split the single tract into five tracts and resulted in an
increased appraised value (from $15.4 million to $19.9 million). A major factor
influencing the appraisal of the five tracts was an option by a private party to
buy another parcel on the island with a proposed price of $4 million. We have
a concern as to whether an unexercised option to purchase the other parcel,
rather than closed sales data, should have been the major reason for the
increased value of the Greylield tract. Section A-4 of the Uniform Appraisal
 Standards for Federal Land Acquisitions (1992, p.14) states that “mere offers
and unexercised options ... are inadmissible as evidence of value and should not
be used in appraising fair market value.”

If the five-tract appraisal ($19.9 million) had not relied on an unexercised
option, it is possible that the price would have been lower. It should be noted,
however, that condemnation could result if the present option agreement is not
exercised fully. If the Greyfield tract were sold to a developer, NPS would
probably condemn the property, depending on available funding. If this were to
occur, condemnation could result in a higher price because there is a strong
possibility that the price set in court would substantially exceed the current
contract price. The current price of $17.9 million for the remaining four tracts
may, in practical terms, be the lowest price at which the government could
purchase the property.

    We conducted a limited review of the issues raised by your questions from
    August 13 to September 5, 1997, in accordance with generally accepted
    government auditing standards. We reviewed the legislation, the legislative
    history and the court cases related to the seashore. We did not review the
    impact of other federal statutes, such as Section 404 of the Clean Water Act or
    the Endangered Species Act, or state or local laws that may affect development
    of the Greyfield tract. We also reviewed the appraisal process but did not
    appraise the land. We visited NPS headquarters and Southeast Region’s land
    resources offices for interviews and a review of land acquisition files. We also
    interviewed attorneys at the Department of the Interior; the contract appraiser;
     and interested parties, including the sellers’ attorney, The Nature Conservancy
     and its‘attorneys, a representative from the Rings Bay Submarine Base, the


    2                            GAO/RCED-97-251R   Cumberland   Island   Land Acquisition
B-278106
National Parks and Conservation Association, and appraisal experts outside of
NPS.

We obtained agency comments on the results of our work from NPS
headquarters and regional officials, including the Chief of the Land Resources
Division. The officials concurred with the factual content and made a comment
 on our concern about the second appraisal. They said that since there were no
recent sales on the island, the option agreement was considered the next best
evidence. NPS officials said that the appraised value of the five tracts was
justified because of the phased nature of the acquisition and the time value of
money. Enclosure I provides the results of our review.



As agreed with your offices, unless you publicly announce its contents earlier,
we plan no further distribution of this report until 30 days from the date of this
letter. At that time, we will make copies of this report available to others upon
request.

If you have any questions or need additional information, please contact me -on
(202) 51.2-3841. Major contributors to this report were Cliff Fowler, Richard
Kasdan, and John Scott.




Victor S. Rezendes
Director, Energy, Resources,
 and Science Issues

Enclosure




                               GAO/RCED-97-251R   Cumberland   Island   Land Acquisition
ENCLOSURE I                                            ENCLOSURE I




CLQ Briefing for Congressional               Requesters


        Land Acquisition at the Cumberland
        Island National Seashore, Georgia




                          GAO/RCED-97-25IR    Cumberland   Island Land Acquisition
  4
ENCLOSURE I                                                   ENCLOSURE I




G+W Background


      l   f? L. 92-536, approved Oct. 23, 1972,
          established the Cumberland Island
          National Seashore.
      l   l? L. 97-250, approved Sept. 8, 1982,
          designated land within the seashore
          boundary as wilderness and potential
          wilderness.




5                             GAO/RCED-97-251R   Cumberland    Island Land Acquisition
ENCLOSURE I                                                   ENCLOSURE I




MCI           Background (con?)


      l       Of the 36,415 acres of land within the
              seashore, only 25 tracts, or 1,784 acres,
              remain to be acquired.
       l      The 1,148-acre Greyfield tract is the
              largest remaining tract and is mostly
              within the wilderness boundary.
          l   The National Park Service (NPS) list of
              land acquisition priorities for FY 1998
              puts the Greyfield tract at Cumberland
              Island at the top.




                                  GAO/RCED-97-251R   Cmnberland   Island Land Acquisition
ENCLOSURE I                                                   ENCLOSURE I




GM        Objectives


      l   How was the price determined for the
          Greyfield tract?
      l   Are normal procedures being used to
          acquire the Greyfield tract?
      l   Does federal legislation establishing the
          seashore or its wilderness area prevent
          development of this private property if
          not purchased by NPS?




                              GAOIRCED-97-251R   Cumberland    Island   Land Acquisition
7
ENCLOSURE I                                                  ENCLOSURE I




w           Objectives (can’t)

        l   Will there be additional costs for security
            at the Navy’s Kings Bay Submarine Base
            if this property is developed?




                                 GAO/RCED-97-251R   Cumberland   Island Land Acquisition
    8
ENCLOSURE I                                                    ENCLOSURE I




w         Results in Brief


      l   An appraisal was used to determine the
          price for the Greyfield tract as required.
      l   There was nothing unusual about the                                      .
          acquisition procedures used.
      l   Legislation concerning Cumberland
          Island does not preclude the
          development of the Greyfield tract.
      l   Need for additional Navy base security
          depends on the increase in boat traffic.




                               GAO/RCED-97-251R   Cumberland    Island   Land Acquisition
ENCLOSURE I                                                 ENCLOSURE I




GAQ Scope and Methodology


       l   During the 3 weeks of our review, we
           --visited NPS headquarters and
           Southeast Region’s land resources
           offices for interviews and review of files; .
           --interviewed Dept. of the Interior
           attorneys and the contract appraiser;
           --interviewed interested parties: seller’s
           attorney, The Nature Conservancy
           (TNC) and its attorneys, Kings Bay
           submarine base representative, and




                                GAO/RCED-97-251R   Cumberland   Island Land Acquisition
  10
ENCLOSTJREI                                                 ENCLOSURE I




GAs3 Scope and Methodology                (can’t)


      (can’t) the National Parks and
      Conservation Association;
      --interviewed appraisal experts outside of
      the NPS;
      --reviewed the process of appraisal and
      acquisition but did not do an appraisal of
      the land;
      --reviewed the legislation pertaining to the
      seashore, the legislative history, and court
      cases.




                            GAO/RCED-97-251R   Cumberland    Island Land Acquisition
 11
ENCLOSURE I                                                 ENCLOSURE I




w            Scope and Methodology           (can’t)

         l   We did not review the impact of other
             federal statutes, such as Sec. 404 of the
             Clean Water Act or the Endangered
             Species Act, or state or local laws that  .
             may affect development of the Greyfield
             tract.




                                 GAO/WED-97-251R   Cumberland   Island Land Acquisition
    12
ENCLOSURE I                                                   ENCLOSURE I




MCI       How was the price determined?


      l   The Greyfield tract has long been on the
          priority list for acquisition by NPS.
      l   NPS’ land protection plan for
          Cumberland Island states that the
          purchase is needed to manage the
          wilderness area and to curtail current
          and potential uses of the property.




                              GAO/RCED-97-251R   Cumberland    Island   Land Acquisition
13
ENCLOSURE I                                                     ENCLOSURE I




QD             How was the price determined?                        (can’t)


       l       Negotiations with sellers’ attorney have
               been ongoing since early 1995 by NPS
               and TNC, which became involved at
               NPS’ request.

           l   First appraisal done by sellers’ appraiser
               was about $23 million, but the appraisal
               did not meet NPS’ standards; sellers
               offered to sell for $20 million.




                                    GAOLRCED-97-251R   Cumberland   Island Land Acquisition
  14
ENCLOSURE I                                                   ENCLOSURE I




w         How was the price determined?                        (can’t)


      l   Kirkland and Company, the
          NPS-contracted appraiser, found that the
          market value of the 1 ,I 48 acres on
          8/17/96 was $15.4 million ($18,000 per .
          upland acre).
      l   Since a purchase of a single tract for
          $15.4 million was not budgetarily
          feasible, TNC, with input from NPS,
          negotiated the purchase of the land
          divided into 5 tracts.




                              GAO/RCED-97-251R   Cumberland    Island Land Acquisition
 15
ENCLOSURE I                                                   ENCLOSURE I




w            How was the price determined? (can’t)


         l   Another appraisal of the 5 individual
             -tracts was done by Kirkland, as of
              10/4/96, and found that five tracts had a
             total market value of $19.9. million       .
              ($25,000 per upland acre).
         l   A major factor influencing the 5-tract
             appraisal was an option by a private
             party to buy another parcel on the island,
             the 82-acre Rose tract, with a proposed
             price of $4 million ($49,218




                                  GAO/RCED-97-251R   Cumberland   Island Land Acquisition
    16
ENCLOSURE I                                                   ENCLOSURE I




GAQ How was the price determined?                              (can’t)


      l   (can’t) per upland acre). As of g/8/97,
          this option had not been exercised.
      l   The appraised price for 5 tracts was                                  .
          agreed to by the sellers and TNC in an
          option agreement--a total of $19.9
          million. NPS agreed to buy the tracts
          from TNC if funding was available.
      l   The option agreement allows the prices
          on the final two purchases to increase
          based on NPS-approved appraisals.




                              GAO/RCED-97-251R   Cumberland    Island Land Acquisition
ENCLOSURE I                                                   ENCLOSURE I




w            How was the price determined? (can’t)

         l   The first option for 148.8 acres (90 acres
             upland) was exercised for $2 million by
             TNC on 3/3/97, and NPS in turn
             purchased it from TNC for the same
             price on 3/20/97.
         l   TNC has options to purchase the
             remaining 4 tracts for a total of $17.9
             million that must be exercised by
             1 l/1/97, 4/l /98, 4/l/99, and 4/l/00.




                                  GAOLRCED-97-251R   Cumberland   Island Land Acquisition
    18
ENCLOSURE I                                                                                ENCLOSURE I




w       The Greyfield Tract

                                                                                            -f ~o~dhb~e   (~orlh)
                                                                                            302.116.79
                                                                                      f-

                                                         139.    lOId
                                                                 148.8   AC        II 2

                                                                O!
                                                   17%      195.6 AC




                         288.4   ac (upfond)




                                                  LY     Coardlnotc      (NorIb)
                                                       297.689.67




        Source: National Park Service




                                               GAO/RCED-9?-251R               Cumberland    Island Land Acquisition
 19
ENCLOSURE I                                                      ENCLOSURE I




w            Were normal procedures used?

         l   Based on our limited review, there was
             nothing unusual about the acquisition
             procedures used.
         l   Use of a third party, such as TNC, to
             facilitate the acquisition is common in
             federal land management agencies.




                                  GAO/RCED-97-251R   Cmberland     Island Land Acquisition
    20
ENCLOSURE I                                                    ENCLOSURE I




w         Does the seashore legislation prevent
          development of private property?
      l   No, NPS has consistently interpreted this
          and similar legislation as restricting only
          NPS property within national parks.
      l   A 1978 federal court condemnation case
          on property on Cumberland Island did
          not interpret the legislation as limiting
          development.
      l   Analysis of 1972 Cumberland Island
          legislation shows that its restrictions only
          apply to NPS property.




21                             GAO/RCED-97-251R   Cnmberland    Island   Land Acquisition
ENCLOSURE I                                                      ENCLOSURE I




w                Does the seashore legislation prevent
                 development of private property?(con’t)
         l       Earlier statutes--the Cape Hatteras
                 (1937) with an identical provision and
                 Cape Cod with similar provision (1961)~-
                 support this interpretation.
         l       No cases reported that treat these
                 statutes as a development restriction for
                 which “just compensation” was due.
             l   Property deeds and title insurance on the
                 first tract do not identify a develop-
                 ment restriction in the legislation.




                                     GAOfRCED-97-251R   Cumberland   Island Land Acquisition
    22
ENCLOSURE I                                                    ENCLOSURE I




w         Does the wilderness area legislation
          affect private property?
      l   No, under the 1982 law establishing the
          Cumberland Island wilderness, private
          property within the statutorily designated
          area is only a potential wilderness. It will .
          become part of the wilderness area and
          subject to federal legislation only when
          the federal government acquires the
          property.




                               GAO/RCED-97-251R   Cumberland    Island Land Acquisition
23
ENCLOSURE I                                               ENCLOSURE I




w          Cost of additional security at the
           Navy’s Kings Bay Submarine Base?
       l   More recreational traffic on and across
           the intracoastal waterway in Cumberland
           Sound could be a safety and security
           concern for the base.
       l   Currently 500 boats a month at the peak
           and 75 to 100 during winter months use
           the intracoastal waterway, and the base
           has one security boat on patrol for
           perimeter security and water safety.




                               GAO/RCED-97-251R   Cumberland   Island Land Acquisition
ENCLOSURE I                                                  ENCLOSURE I




w         Cost of additional security at the
          Navy’s Kings Bay Submarine Base?
      l   The amount of traffic increase with more
          development on Cumberland Island is
          unknown. The point at which more
          security would be required is unknown, .
          but would be based on the judgment of
          base officials.
      l   Kings Bay estimates that the addition of
          another security boat and operator would
          cost $150,000 per year.




                             GAO/RCED-97-251R   Cnmberland    Island Land Acquisition
25
ENCLOSURE I                                              ENCLOSURE I




w         Observations


      l   Appraisals are not an exact science. On
          the basis of what we have learned from
          documents, officials involved, and
          outside experts, we have a concern
          about the final appraisal of the 5 tracts
          for $19.9 million.




                              GAOLRCED-97-251R   Cumbedand   Island Land Acquisition
 26
ENCLOSURE I                                                ENCLOSURE I




w       Observations   (con?)


      . Our concern is whether a still
        unexercised option for the Rose tract
        rather than closed sales should have
        been the major reason for the increased .
        value of the Greyfield tract ($15.4 for 1
        tract to $19.9 million for 5 tracts).




27                         GAO/RCED-97-251R   Cumberland   Island Land Acquisition
ENCLOSURE I                                               ENCLOSUlXEI




GAD Observations        (can’t)

      l   Sec. A-4 of the Uniform Appraisal
          Standards for Federal Land Acquisitions
          (1992, p. 14) states “Mere offers and
          unexercised options ..mare inadmissible                             .
          as evidence of value and should not be
          used in appraising fair market value.”
       * If the 5-tract appraisal ($19.9 million) had
         not relied on an option, it is possible that
         the price would have been lower.




                              GAO/RCED-97-251R   Cumberland   Island Land Acquisition
 28
ENCLOSURE I                                                    ENCLOSURE I




G+D Observations         (can’t)


      l   It should be noted, however, that
          condemnation could result if the present
          option agreement is not exercised fully.
          --The sellers’ attorney states that they  .
          have developers interested who will buy
          the property.
          --If the Greyfield parcels are sold to a
          developer, the Park Service will probably
          condemn the property if they have
          funding available.




                               GAO/RCED-97-251R   Cumberland    Island Land Acquisition
ENCLOSURE I                                                    ENCLOSURE I




MO         Observations   (can’t)


       l   Condemnation could result in a higher
           price because there is a strong
           possibility that the price set in court
           would substantially exceed contract                                     .
           price.
       l   The current price of $17.9 million for the
           remaining 4 tracts may, in practical
           terms, be the lowest price the
           government could purchase the property
           for .




                                    GAO/RCED-97-251R   Comberland   Island Land Acquisition
ENCLOSURE I                                                   ENCLOSURE I




w         Observations (can’t)


      l   TNC informed us that it would not
          exercise the next option on Nov. 1 if
          funds are not appropriated to NPS,
          effectively ending the current agreement..




                              GAOIRCED-97-251R   Cumberland    Island Land Acquisition
31
ENCLOSURE I                                                      ENCLOSURE I




G#O Agency Comments

         l       NPS officials concurred with the factual
                 content of our report but commented on
                 our concern about the second appraisal.
         l       They said that since there were no
                 recent sales on the island, the option
                 was considered the next best evidence.
             l   NPS officials said the appraised value of
                 the 5 tracts was justified because of the
                 phased nature of the acquisition and the
                 time value of monev.




    (141098)
    32
                                     GAO/RCED-97-251R   Cumberland   Island Land Acquisition
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