SPEAKERS CONTENTS INSERTS
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HEARING ON BUREAU OF LAND MANAGEMENT REALTY AND APPRAISAL ISSUES
SUBCOMMITTEE ON NATIONAL PARKS AND PUBLIC LANDS
COMMITTEE ON RESOURCES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
MARCH 24, 1998, WASHINGTON, DC
Serial No. 10586
Printed for the use of the Committee on Resources
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DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana
JAMES V. HANSEN, Utah
JIM SAXTON, New Jersey
ELTON GALLEGLY, California
JOHN J. DUNCAN, Jr., Tennessee
JOEL HEFLEY, Colorado
JOHN T. DOOLITTLE, California
WAYNE T. GILCHREST, Maryland
KEN CALVERT, California
RICHARD W. POMBO, California
BARBARA CUBIN, Wyoming
HELEN CHENOWETH, Idaho
LINDA SMITH, Washington
GEORGE P. RADANOVICH, California
WALTER B. JONES, Jr., North Carolina
WILLIAM M. (MAC) THORNBERRY, Texas
JOHN SHADEGG, Arizona
JOHN E. ENSIGN, Nevada
ROBERT F. SMITH, Oregon
CHRIS CANNON, Utah
KEVIN BRADY, Texas
Page 3 PREV PAGE TOP OF DOCJOHN PETERSON, Pennsylvania
RICK HILL, Montana
BOB SCHAFFER, Colorado
JIM GIBBONS, Nevada
MICHAEL D. CRAPO, Idaho
GEORGE MILLER, California
EDWARD J. MARKEY, Massachusetts
NICK J. RAHALL II, West Virginia
BRUCE F. VENTO, Minnesota
DALE E. KILDEE, Michigan
PETER A. DeFAZIO, Oregon
ENI F.H. FALEOMAVAEGA, American Samoa
NEIL ABERCROMBIE, Hawaii
SOLOMON P. ORTIZ, Texas
OWEN B. PICKETT, Virginia
FRANK PALLONE, Jr., New Jersey
CALVIN M. DOOLEY, California
CARLOS A. ROMERO-BARCELÓ, Puerto Rico
MAURICE D. HINCHEY, New York
ROBERT A. UNDERWOOD, Guam
SAM FARR, California
PATRICK J. KENNEDY, Rhode Island
ADAM SMITH, Washington
WILLIAM D. DELAHUNT, Massachusetts
Page 4 PREV PAGE TOP OF DOCCHRIS JOHN, Louisiana
DONNA CHRISTIAN-GREEN, Virgin Islands
RON KIND, Wisconsin
LLOYD DOGGETT, Texas
LLOYD A. JONES, Chief of Staff
ELIZABETH MEGGINSON, Chief Counsel
CHRISTINE KENNEDY, Chief Clerk/Administrator
JOHN LAWRENCE, Democratic Staff Director
Subcommittee on National Parks and Public Lands
JAMES V. HANSEN, Utah, Chairman
ELTON, GALLEGLY, California
JOHN J. DUNCAN, Jr., Tennessee
JOEL HEFLEY, Colorado
WAYNE T. GILCHREST, Maryland
RICHARD W. POMBO, California
HELEN CHENOWETH, Idaho
LINDA SMITH, Washington
GEORGE P. RADANOVICH, California
WALTER B. JONES, Jr., North Carolina
JOHN B. SHADEGG, Arizona
JOHN E. ENSIGN, Nevada
ROBERT F. SMITH, Oregon
Page 5 PREV PAGE TOP OF DOCRICK HILL, Montana
JIM GIBBONS, Nevada
ENI F.H. FALEOMAVAEGA, American Samoa
EDWARD J. MARKEY, Massachusetts
NICK J. RAHALL II, West Virginia
BRUCE F. VENTO, Minnesota
DALE E. KILDEE, Michigan
FRANK PALLONE, Jr., New Jersey
CARLOS A. ROMERO-BARCELÓ, Puerto Rico
MAURICE D. HINCHEY, New York
ROBERT A. UNDERWOOD, Guam
PATRICK J. KENNEDY, Rhode Island
WILLIAM D. DELAHUNT, Massachusetts
DONNA CHRISTIAN-GREEN, Virgin Islands
RON KIND, Wisconsin
LLOYD DOGGETT, Texas
ALLEN FREEMYER, Counsel
TODD HULL, Professional Staff
LIZ BIRNBAUM, Democratic Counsel
GARY GRIFFITH, Professional Staff
C O N T E N T S
Hearing held March 24, 1998
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Statements of Members:
Faleomavaega, Hon. Eni F. H., a Delegate in Congress from the Territory of American Samoa
Hansen, Hon. James V., a Representative in Congress from the State of Utah
Statements of witnesses:
Gardner, Alan, County Commissioner, Washington County, Utah
Prepared statement of
Glass, Thomas R. H., Western Land Group Inc.
Prepared statement of
Hanson, Woodward S., Hanson Appraisal Company, Inc.
Prepared statement of
Harja, John, Governor's Office of Planning and Budget, State of Utah
Prepared statement of
Shea, Pat, Director, Bureau of Land Management; accompanied by Bill Lamb, Director, State of Utah; and David Cavanaugh, Senior Appraiser, Bureau of Land Management
Prepared statement of
Additional material supplied:
Carrick, David, Shepard & Assoc., Inc., Public Land Exchange, Boulder, Colorado, prepared statement of
Johnson, Curt, Commissioner, Office of the Commissioner of School and Public Lands, Pierre, South Dakota, prepared statement of
HEARING ON BUREAU OF LAND MANAGEMENT REALTY AND APPRAISAL ISSUES
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TUESDAY, MARCH 24, 1998
House of Representatives, Subcommittee on National Parks and Public Lands, Committee on Resources, Washington, DC.
The Subcommittee met, pursuant to notice, at 10 a.m., in room 1324, Rayburn House Office Building, Hon. James V. Hansen (chairman of the Subcommittee) presiding.
Mr. HANSEN. [presiding] The Subcommittee convenes to conduct an oversight hearing on BLM land exchanges and realty appraisals.
STATEMENT OF HON. JAMES V. HANSEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH
Mr. HANSEN. The land disposition policies of the 1800's gave us an extremely fragmented ownership pattern for western lands. I refer you to the map of Utah over there as an example of this problem. This checkerboard pattern of ownership in the West makes Federal lands difficult to manage and causes numerous problems for state and private landowners.
The Federal Lands Policy and Management Act of 1976 declared land exchanges the preferred method for blocking up the public lands into manageable tracts. It sounded like a great idea. We weren't going to have any net loss of public lands, we were just going to trade parcels around until we ended up with manageable tracts. Unfortunately, things haven't worked out as well as we hoped they would.
I have seen minor land exchanges that have taken 15 years to complete. I don't think people should have to spend a quarter of their lifetime fighting bureaucratic red tape trying to trade out a small inholding. Somehow we've got to figure out a way to speed things up. We've passed several land exchange facilitation bills since FLPMA, and yet the problem persists.
I can personally say that as a city councilman 38 years ago in the little town of Farmington, we spent my whole 12 years on the council trying to trade a piece of land. Always it was going to get done, but the Forest Service and BLM never really got around to it.
Page 8 PREV PAGE TOP OF DOC Then we turned around and I was on the State legislature for four terms and speaker for a term, and we never got it done. And finally, we had to put it into a land exchange bill here in Congress. I've instructed staff to start putting together another land exchange bill for the 11 western States, because contrary to what we've heard from all the agencies, it just doesn't happen and I can get horror stories from every State to back that up.
One of the biggest problems, and the one we will spend most of our time talking about is land appraisals. One problem is that government appraisal standards do not take into account the public interest of land. Appraisers refuse to accept the value of a non-economic quote, ''highest and best use,'' such as endangered species habitat conservation or view-shed preservation.
Typically, a property owner with endangered species habitat never gets credit for having maintained his property in such a manner as to constitute valuable habitat. The highest and best use for his land is preserving the species, and as such, the parcel of land should have enormous value. Unfortunately, since the appraisal process is skewed toward economic uses, the appraiser will value the land at next to zero.
Under this scenario, land exchanges are difficult to consummate. The landowner knows his land is much more valuable than the appraisal says it is, and the BLM or whoever refuses to accept public interest value as legitimate criteria on which to base an appraisal. Often, neither side will budge and we go through this same old game we've played around here for my 18 years.
I hope that we can come up with some answers here today. Maybe there are some simple ways of solving these problems, maybe not. Either way, I appreciate the willingness of our witnesses to participate in this dialog.
The gentleman from Puerto Rico, do you have an opening statement?
Mr. ROMERO-BARCELÓ. No, sir, no opening statement.
Page 9 PREV PAGE TOP OF DOC Mr. HANSEN. Thank you, sir.
As you know, a lot of things are going on right now. Members will dribble in and we will be ready to respond to questions. We only have one panel for today and you are all seated there, so we'll just start with you.
The Director of BLM, Mr. Pat Shea, from the great State of Utah. We are always impressed to have you with us, Pat, and we appreciate you being here. We'll turn to you. And we also have accompanying you Bill Lamb, Director of the BLM for the State of Utah. Is Bill here? He's there as support, is that right? And David Cavanaugh is also here.
Mr. Shea, we'll turn the time to you, sir.
Mr. SHEA. Thank you very much.
Mr. HANSEN. I don't know if I want to limit the Director to 5 minutes. You take whatever time you need but keep it under 20 minutes, will you.
Mr. SHEA. No, no. I will
Mr. HANSEN. Can I hold you for just a minute. We are honored to see the Ranking Member of the Committee just walked in, Mr. Faleomavaega of American Samoa. And if you wouldn't mind holding just a moment, we'll turn to this gentleman for any opening statement he has and pearls of wisdom, which I'm sure we'll receive.
STATEMENT OF HON. ENI F. H. FALEOMAVAEGA, A DELEGATE IN CONGRESS FROM THE TERRITORY OF AMERICAN SAMOA
Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I do have a very short statement, and I do welcome our friends from the Bureau of Land Management for their testimonies this morning.
Mr. Chairman, we all recognize that land exchanges can be a useful management tool that can promote more efficient land management by all concerned. However, land exchanges can also be complicated transactions involving disparate, noncontiguous lands. Adding to this, as we know, appraisals are an art and not a science.
Page 10 PREV PAGE TOP OF DOC There have always been certain underlying principles to Federal land exchanges. First and foremost, such exchanges should be in the public interest. Second, such exchanges should be done on an equal value basis. And third, may I suggest these exchanges should be willing seller to willing buyer type transactions.
I know there are those who would like to speed up land exchanges by cutting a few corners. We cannot or should not cut corners if it means that we undercut the public interest or the principle of equal value exchanges.
I look forward to the testimony of our witnesses this morning and I am interested in any ideas they may have for the improvement of the exchange process, as long as such ideas are consistent with the principles of public interest and equal value.
Mr. Chairman, thank you.
Mr. HANSEN. Thank you. Mr. Shea.
Mr. SHEA. Thank you, Mr. Chairman. I am sure with the Ranking Minority Member's concurrence, that we will wish the Running Utes well on Saturday as they move on in the NCAA, just by way of a side note.
Mr. HANSEN. Put that closer to you, if you would, please. We want to pick you up on the recorder.
Mr. SHEA. All right.
STATEMENT OF PAT SHEA, DIRECTOR, BUREAU OF LAND MANAGEMENT; ACCOMPANIED BY BILL LAMB, DIRECTOR, STATE OF UTAH; AND DAVID CAVANAUGH, SENIOR APPRAISER, BUREAU OF LAND MANAGEMENT
Mr. SHEA. Thank you for the opportunity to testify on the Bureau of Land Management's exchange and appraisal process. Since becoming the BLM Director, I have come to appreciate both the importance of the exchange program and its complexity. It is vital that the interests of the taxpayers, the true landowner, be protected and that we find means of improving and facilitating the exchange process.
Page 11 PREV PAGE TOP OF DOC We know that there is room for improvement in our land exchange process. We need to consider how the appraisal process might be revised, whether the BLM is applying consistent criteria in identifying potential land exchanges, how much discretion should be left to local BLM managers, and what guidelines are needed when private developers and nonprofit conservation groups are involved.
By strengthening its land exchange policies and procedures, the BLM can continue to acquire private property for public use while protecting the interests of the American taxpayers.
I have undertaken several measures to improve this program. I have established a procedure for a second level review by the BLM State director or the Washington Headquarters Office. The second level review requires concurrence in decisions involving exchanges greater than $500,000 in value.
These new procedures also require a feasibility analysis report for all land exchanges and require that concurrence for any dismissal of protests to any land exchange decisions. I should add here that in the two months that this process has been in place, there have been no delays in the exchanges that were presently going through the process.
In addition, I am establishing a bureauwide land exchange team to assist in the review of high priority exchanges, provide additional technical support to BLM field offices, and address policy and procedural issues.
And it's my anticipation, Mr. Chairman, that that exchange team will be located outside of Washington, DC and will have strict timeline guidelines to make sure that it does not cause a delay in the process.
Before discussing the specifics of the program, I'd like to offer some background on the exchange program. The BLM, as you know, has stewardship of more than 264 million acres of landmore than any other Federal agency. It completes 60 to 70 land exchanges every year. On average, these exchanges total roughly 150,000 acres of land exchanged each year at a value of approximately $50 million.
Page 12 PREV PAGE TOP OF DOC Land exchanges are an important tool to carry out the BLM land management program. Exchanges allow the BLM to acquire the kind of land that is suited to public ownership; land the public use or for conservation, such as habitat for wildlife, including threatened or endangered species; land that offers recreational opportunities for the public; or land containing sensitive riparian areas that are critical to the health of streams, rivers, and entire watersheds.
Exchanges also allow the BLM to consolidate land ownership patterns where appropriate to increase our efficiencies and reduce cost. The Department strongly supports public ownership of public lands, and is committed to working with other jurisdictions to improve land ownership patterns and the management of those lands. This is consistent with the Federal Land Policy and Management Act of 1976.
Historically, land exchanges are time consuming because of the number of affected parties, user and interest group concerns, and lengthy assessments and analysis procedures. However, the Federal Land Exchange Facilitation Act of 1988 and the joint BLM and Forest Service regulations published in 1993 have provided tools that can improve the land exchange process.
Parties involved in the exchange must reach agreement on a wide variety of issues, including scheduling, sharing of cost, selection of appraisers, number of appraisal reports, and methods of resolving disputes concerning the appraised value. Like other complicated real estate transactions, there can be periodic delays and disagreements between the parties.
And I've given you several examples in the testimony that I submitted for the record, where it gives you a state-by-state breakout. I won't go through those, but will certainly be able to answer questions that the Committee might have about that.
The vast majority of land exchanges are like these examplesso clearly logical and mutually beneficial that they are completed without protest or controversy. Sometimes, however, proposed land exchanges do become contentious. Appraisals can be subject to question and criticism from those involved in the proposed exchange, or from outside parties.
Page 13 PREV PAGE TOP OF DOC Appraisals are especially difficult and controversial in areas of rapid growth and volatile market prices. This makes the job of appraisers even more challenging. Land exchanges are voluntary transactions. They require mutual agreement by the parties to the transaction on a wide variety of issues, including value. To be successful, the parties to the transaction must have confidence in the appraisal process.
I'd like to describe briefly how real estate appraisals are incorporated into the land exchange process. The appraisal process is essential in reaching agreement on the value of the lands involved in the exchange. Again, it is important that the parties have confidence in the integrity and impartiality of those involved in the process.
Real estate appraisals are obtained to ''estimate,'' the market value of lands involved in proposed land exchanges. Ideally, the appraisal report is an objective, impartial estimate of what property would sell for on the open market as of the date of the appraisal report. The credibility of the appraiser's report is affected by his or her ability to obtain reliable market information, properly analyze the information, develop and test various assumptions, and reach a logical and supported estimate of the value.
The appraisal report is an opinion of value; an appraiser's estimate of what the property would likely sell for. The appraiser does not determine value, but instead estimates market value.
Appraisal reports are prepared in accordance with BLM appraisal standards in 43 CFR 2200, and to the extent appropriate, with the Department of Justice Uniform Appraisal Standards for Federal Land Acquisition. These standards are consistent with the Uniform Standard of Professional Appraisal Practice published by the Appraisal Foundation, Appraisal Standards Board.
We review appraisal reports to assure that they meet professional and BLM appraisal document standards. The reviewer prepares a report approving the appraisal and recommending its use for purposes of reaching an agreement.
Page 14 PREV PAGE TOP OF DOC If parties to a proposed exchange cannot reach agreement on the approved appraised values, bargaining or other methods may be used to reach an agreement.
If chances for agreement are remote, BLM or the property owner may decide to end further efforts.
We define bargaining as a process other than arbitration by which parties attempt to resolve a dispute concerning the appraised value. Different forms of mediation or dispute resolution techniques may be used to resolve the disagreement. The process is premised on the theory that reasonable people can reasonably disagree with the appraiser's analysis. Therefore, bargaining is limited to the information, assumptions and conclusions in the appraisal reports.
Any agreement reached by the parties must be in writing and made part of the land exchange administrative record. Any appraisals presented during the bargaining process must be open to review by a qualified appraiser representing the agency with responsibility for appraisal review. The BLM State Director must concur in any agreement reached through bargaining.
Once the parties have agreed, BLM published a notice of decision regarding the proposed land exchange transaction. The NOD informs the public of the BLM's decision to proceed with the land exchange. The public has 45 days to comment or protest BLM's decision. During the 45-day period, the appraisal reports, along with other supporting documentation, is available for review by the public.
I want to add here that the public's review of any exchange is an essential part of my, and I believe, the Bureau's filling its fiduciary duty to the taxpayers. I think a great deal of problems could have been avoided in the past had there been a more complete public review of the proposed transactions.
In conclusion, I hope the information I have shared today has clarified the process and demonstrated my commitment to achieving a better program. Protecting the natural resources, protecting the public's assets, and achieving a fair market return on all land transactions are my primary goals.
Page 15 PREV PAGE TOP OF DOC I believe that a hearing like this can be an interesting forum to explore means by which we could make adaptations that might meet some additional needs that constituents of yours or other members of the Committee may have brought to your attention.
This concludes by statement, and I will be glad to answer questions you may have.
[The prepared statement of Mr. Shea may be found at end of hearing.]
Mr. HANSEN. Thank you, Mr. Director. We appreciate your statement. Mr. John Harja of the Governor's State of Utah, Office of Planning and Budget, we'll turn the time to you, sir.
STATEMENT OF JOHN HARJA, GOVERNOR'S OFFICE OF PLANNING AND BUDGET, STATE OF UTAH
Mr. HARJA. Thank you, Mr. Chairman. I'd like to say I am here today as vice chair of the board of trustees for the School and Institutional Trust Lands. I'm not sure it is, but it's the second largest landowner in the State of Utah.
The school trust lands, of course, were given for a specific purpose, and that is to generate income for the schools. And as such, and as you mentioned, they are scattered all over the state. When the BLM or the Federal Government decides to engage in protective activities such as national parks, monuments, ESA protection areas and the sort, our lands are inevitably involved. So we have a vested interest in seeing exchanges.
With that in mind, they have to be efficient and they have to have low transaction costs to be attractive to us, and that is basically what we see not happening. With trust lands, there are no two-parties with BLM. There are mineral lease payments in targets. If the target is a mineral acquisition, half of the money comes to the State of Utah, and that has to be recognized in any exchange proposal.
Page 16 PREV PAGE TOP OF DOC There is also a restriction on what Trust Lands can do in terms of selling its minerals, which is why we're so interested in exchanges. The State and local government is also involved, as I mentioned. The mineral lease payments and local people are always very interested in those and the actual use of the land. So there are no two-party exchanges.
The main issues for us are what we would want to acquire and the valuation issue, which is I think the key target today. Trust Lands is very interested in administrative exchanges and entered into an MOU with the BLM a couple of years ago to try to expedite this process, and instead, has found it seriously slowed down.
I'm going to discuss some of those, but as I do, I would like to mention right now though that we are very appreciative of the help of Mr. Bill Lamb, the State Director, has given us and his process in bringing in outside facilitators as help to unstick some of the deals. We actually, in fact, did complete an exchange recently involving some habitat conservation areas near St. George for some property up near Park City.
As we see it, there are basically a couple of difficulties. Some have to do with the substantive issues and most of them have to do with the process. The substantive issue as we see it has to do with prejudging the issue. As we talk with BLM appraisers, they are full of statements like, your land is worthless and we don't need to do a serious appraisal here because we can complete this is a couple of months.
For example, in 1993, this Congress passed what we call the inholdings bill, Public Law 10393, a bill designed to help us get our trust lands out of the national parks. As the bill was being signed by the President, we got together and the BLM appraisers said this should take us two months. That didn't give us any great feeling of hope. In fact, it's five and a half years later. The appraisal process itself took two of those years, just to have four people appraise 539 separate tracts of land.
The point of all that is we have to have trust in what the BLM will do. We need to know are they going to be fair, are they going to give us a fair shake. And when we get statements like that put in up front, it's very difficult to believe that either the appraisal or the review will be fair to us. So we get stuck in an impasse.
Page 17 PREV PAGE TOP OF DOC The procedural issue I think that we see is we don't know exactly how it's going to proceed. Appraisals are done and then what? It was never made very clear to us in either inholdings or some of our other exchanges that are underway what would happen.
The Director mentioned bargaining. That was never made clear to us that this is how we'll bargain. The universe of bargaining or the universe of mediation is never made clear.
In addition, there are a number of outside effects that seem to pop up that give us difficulty and make us think the process in not fair. They have to a lot with what I call the tail wagging the dog. We look at the person that's been designated to work with and we say, OK, you're the contact person and you're the person that we'll start with.
And as we proceed to try to negotiate a process that will work, to clarify what I just mentioned, other people lower down in the chain will start tossing in extraneous things like ethical complaints against appraisers or complaints that the process itself that we just designed in order to complete this is not fair to the Federal taxpayer.
Now we're not trying to be unfair to the Federal taxpayer, but we are trying, as two sovereigns, to negotiate a process that will lead to a result. And if an appraiser is saying it's unfair to the Federal taxpayer, it gives the Director pause. And one year of a delay in our inholdings process was due to this sort of thing.
The point is we're willing to work with the BLM in whatever process we can negotiate. And the Director mentioned all of their requirements, and most of those are OK as long as we can see that this is the path. But it needs to stick there. And if the appraisers are undermining the process, then nobody knows where we're going and it just leads to a big stuckness, impasse.
The basic problem in terms of valuation is appraisers can, in fact, as the Director mentioned, come out with wildly differing values. We've seen millions of dollars in difference, or hundreds of millions of dollars, in some cases. How do we resolve that?
Page 18 PREV PAGE TOP OF DOC Mr. Secretary Babbitt has mentioned horse trading, he's mentioned being creative and solving that. That's fine with us; we're willing to be very creative. But we need to understand how the appraisal process gets into that.
The chairman mentioned the natural valuation issue. I don't want to go into that a whole lot, but I would like to mention that it is certainlymaybe Mr. Hansen will talk about it morethe appraisal industry is engaged in a big debate on how that should work out.
I think that from our perspective, the Federal Government is kind of missing the point. The chairman mentioned economics. We don't call it economics, we call it non-monetary uses.
For example, school trust lands recently in the recent year has auctioned off a number of lands and the values have ranged from $400 to $600 an acre up to $4,000 an acre. These are people that just want to own the land. They have no water, no power. All they want to do is own the land and basically leave it be. This is a market, in our view. People are spending money for this kind of thing. This has gotten to be taken into account in the Federal process, and right now, that's very difficult. I think it's sort of like the Federal Government is ignoring the issue.
Congressional action, I think, is necessary for some things. For example, Congress passed something in the St. George area that the appraisers would not consider the effects of Endangered Species Act. I think that was right, and that's the sort of thing that might help unstick some problems. And I would certainly, as those come up, ask the Congress to consider that.
My own belief is becoming that appraisals, the detailed appraisal process is very difficult in large exchanges like we're engaged in. We have our inholdings of 539 tracts. We have a new national monument; we'll have 337 tracts in there. It simply becomes too large and too unwieldy.
Page 19 PREV PAGE TOP OF DOC Some way to collect issues or collect tracts into groups is necessary here and it may take the Congress to help us do that. In fact, what we think is better is in 1996, there was an Arkansas Oklahoma Exchange Act passed. Evidence of value was basically presented up here in the Congress and Congress directed that this thing happen. For large exchanges, I am becoming more and more convinced that may be the way to have it proceed.
With that, Mr. Chairman, I will quit.
[The prepared statement of Mr. Harja may be found at end of hearing.]
Mr. HANSEN. Thank you, Mr. Harja. Commissioner Alan Gardner, County Commissioner of Washington County, Utah. If you will you pull that mike up to you, Commissioner, I would appreciate it, and we will turn the time to you, sir.
STATEMENT OF ALAN GARDNER, COUNTY COMMISSIONER, WASHINGTON COUNTY, UTAH
Mr. GARDNER. Thank you. And I would like to echo a lot of John's comments. My name is Alan Gardner and I live in Washington County, Utah, where I presently serve as a County Commissioner. My family owns property in an area designated as habitat for the Desert Tortoise. And for the last 8 years, we've been involved in the process of establishing a habitat conservation plan within Washington County under the Endangered Species Act.
And I do appreciate the opportunity to say a few words about the inappropriate way we have been dealt with property holders in the HCP. We indicated initially to the BLM and the Fish and Wildlife Service that we liked the property that we had, but we would be willing to accommodate the creation of the HCP by trading our property, along with others in the area, for BLM property of like value.
We are one of 35 other different owners of 6,803 acres of private property, and that doesn't include any school trust lands, that was to be included in this Desert Tortoise HCP that encompasses about 65 square miles.
Page 20 PREV PAGE TOP OF DOC Because of the suggested devaluation of private property by Mr. Jack McDonald of the State BLM office, it took intense negotiations that lasted almost a year between BLM, Fish and Wildlife, the Justice Department, Washington County, and the private landowners to finally come to an agreement as to how value was to be determined.
And there was a preliminary estimate of value established by an accepted appraiser, and this appraiser was to be selected by the private property holders from an approved list of appraisers furnished by the BLM. This estimate was then to be reviewed by Mr. Don Duskin, BLM's chief appraiser for Oregon and Washington, and the preliminary estimate was then to be upgraded to a final appraisal prior to completing an exchange. Neither the State BLM office or any of its contract appraisers were to be involved in any of this process.
Everything was moving along nicely until Mr. McDonald of the State Office of Appraisers did not like the value of the property and, contrary to the agreement, sent down his own appraiser, Mr. Paul Meiling, who determined that since our property was tortoise habitat, it was only of token value and appraised it at less than 15 percent of the preliminary value estimate.
This devaluation of our property is a classic example of green-collar crime. Net gains stolen by the government would have been over $1.5 million for my family. By this breach of agreement by BLM and the subsequent devaluation, all the HCP property trades came to a screeching halt.
Almost a year later, we once again agreed to proceed under a bargaining agreement with a team appointed by the BLM. We came to a bargain value, and in so doing conceded to give up $1,000 an acre or $239,000 which would have been the cost of doing a Section 10 permit on our property if we were to develop it ourselves.
We also had to pacify Fish and Wildlife Service by agreeing to a fencing cost that came to another $63,360 for a total of $302,360 in mitigation costs.
Page 21 PREV PAGE TOP OF DOC BLM agreed that since our value was frozen at the March 20, 1996 date, whatever property we acquired from the BLM would be valued at that same date. Coming up with a value for like property to trade has been just as frustrating as the first part of the trade.
After disposal property by BLM had been identified, we selected an appraiser from the BLM list. His appraisal was reviewed and accepted by Mr. John Widdoss of BLM, but was eventually rejected by Washington. We selected a different appraiser from their approved list and his work was likewise rejected.
So once again, BLM contracted their own appraiser and another appraisal has been completed on the trade property. It seems that they have the ability to keep requesting appraisals until the numbers satisfy them, with no consideration given to the rights of the private property holders.
Another area of concern is that even though the private property holders in the HCP were not anxious to exchange their property, but were willing to do so to accommodate the proposed HCP, they were still required to bear the cost of the appraisals and surveys of the lands they were trading for.
A final concern is the complication and expense that comes about because of the historical and archeological sites. The mitigation costs were allowed to devalue our property, but in the case of the trade properties, they can become almost insurmountable expense that is added to the price. Why should the private property holder get deducted on one side and charged on the other? It appears to be a double whammy.
Those mitigation costs should be subtracted from the value of the property trades.
In the case of the Washington County Water Conservancy District, those costs, including the clearance costs, have come to almost $800,000. And I might note in two months of working on the archeological clearances, for that money they have found one arrowhead and a bunch of charcoal.
Page 22 PREV PAGE TOP OF DOC The appraisal of other private property within the HCP has improved since most recent legislation has helped to clarify the value of habitant land in Washington County. Also, the Utah State Director of BLM, Mr. Bill Lamb, has assigned more local BLM personnel to assist in land exchanges. Mr. Cavanaugh from Washington has been to St. George several times to try to expedite this process, which we appreciate very much. But this process is still trying.
I have a few suggestions that I would like to offer. Somehow the decisions need to be made on a more local basis with enough staff in the local office to accommodate it, and reasonable appraisers in the State office to back up. The time to accomplish the trade needs to be greatly reduced. There has to be recognition of fair market value without the presence of an endangered species considered.
Mitigation costs for archeological sites should be deducted from the appraised value if they are going to be paid by the new owner. And there should be a limit to the number of appraisals and reviews that can be done on any one piece of property.
Thank you very much.
[The prepared statement of Mr. Gardner may be found at end of hearing.]
Mr. HANSEN. Thank you, Mr. Gardner. Mr. Hanson from Hanson Appraisal Company, we turn the time to you, sir.
Mr. WOODWARD HANSON. Yes, sir. I'd first like to thank Congressman Goss for providing the introduction and thank you, sir, for giving me an invitation and an opportunity to appear before this Subcommittee.
I also ask that you please include my full written testimony, along with my supplemental summary of today's oral testimony into the record.
Mr. HANSEN. Without objection, all of the full testimony will be included in the record.
Page 23 PREV PAGE TOP OF DOC Mr. WOODWARD HANSON. Yes, sir. Thank you.
STATEMENT OF WOODWARD S. HANSON, HANSON APPRAISAL COMPANY, INC.
Mr. WOODWARD HANSON. First, what I'd like to do is begin by identifying what the appraisal industry perceives is the problem. As 1998 Vice President of the Appraisal Institute and an MAI member with 20,000 members nationwide, we have dealt with this problem again and again.
We believe that the valuation of public lands, balancing preservation and development, is not an economic issue. It is a social, cultural, political issue, and it requires a political solution. Others agree. Recently, an article was published in the National Resources Law Center Review from the University of Colorado, right on point with this in that regard.
Currently, there is a fundamental disagreement over the elements of value for public and natural lands. The problem has led to wide ranges of value estimates for public lands and increased delays in land transactions.
I know that most of you are familiar with the Dell Webb land transaction involving 4,700 acres of public lands located south of Las Vegas, Nevada. But let me take a few moments to give you some highlights of this exchange with respect to the appraisal issues.
From our understanding of our land swap, it was well-documented that the case illustrates large deviations in the land value estimates and an extended time period to complete the land transaction process.
Regarding the land value estimates, value estimates ranging from $9,000 per acre to $10,600 per acre were first obtained by BLM, whereas third-party intervenors have appraised the property at $36,000 per acre, representing a difference of almost $12 million. Shocking as this may be, this is not an isolated incident.
In addition, the complexity of the appraisal problem and the possibility and potential of third-party intervention and lack of an effective public policy to address the valuation involved drags transactions like this on for years without resolutions.
Page 24 PREV PAGE TOP OF DOC And part of the complexity of these types of appraisal assignments is you're dealing with properties in transitionary locations that have other issues such as comprehensive plan amendments, zoning changes, infrastructural extension, offsite liabilities, et cetera.
The solution: I'm here to offer what I believe is the pathway to a solution. Congress needs to make a real commitment to better define its public policy relating to the valuation of public lands.
Congress also needs to establish clear priorities for the use and development of public lands and natural resources. The appraisal community has already begun working to solve the problem. There is an active debate within the appraisal industry on the issue of the valuation of public lands.
The Appraisal Institute has organized a series of forums and participated in national debates on these issues over the last several years. We have concluded that we cannot solve this problem alone.
This must be a joint effort with Congress and the administration. Because the valuation of public land, balancing preservation and development is not an economic issue, but is a social, cultural, and political issue, we need a political solution. And we appeal to you today to help us find one.
Thank you for your time.
[The prepared statement of Mr. Hanson may be found at end of hearing.]
Mr. HANSEN. Thank you, Mr. Hanson. We appreciate your comments.
We'll now turn the time to Mr. Tom Glass, Western Land Group. Mr. Glass, the time is yours, sir.
Page 25 PREV PAGE TOP OF DOCSTATEMENT OF THOMAS R. H. GLASS, WESTERN LAND GROUP INC.
Mr. GLASS. Thank you, Mr. Chairman, for the opportunity to testify today. My name is Tom Glass and I'm a principal in Western Land Group, a national public lands consulting firm headquartered in Denver.
Thank you again for your sponsorship of FLEFA and your ongoing interests in land exchanges as evidenced by your holding this hearing today. It's very encouraging to us as a small business to have policymakers such as you striving to improve the land exchange process.
Also, Mr. Chairman, thank you for your sponsorship of the Snow Basin Land Exchange legislation. We are working with Mr. Gray Reynolds and the Snow Basin folks as we work to try to resolve some very thorny appraisal issues flowing from your legislation, and we'll keep you posted in that regard.
Since our formation in 1981, Western Land Group has assisted in the consummation of more than 100 Federal land exchanges, utilizing both legislative and administrative processes. We continue to help clients facilitate dozens of new cases involving lands ranging from tens of thousands of acres to less than one acre.
Working in partnership with BLM and the other public land management agencies throughout the West, Western Land Group achieved fundamental public and private land management objectives. These include, but are certainly not limited to, protecting municipal watersheds; placing key threatened wetlands and wildlife habitat in the public domain; eliminating private inholdings in designated wilderness areas; helping municipalities and counties acquire lands for administrative purposes and open space; facilitating responsible community growth; and improving hunting, fishing, and recreational access to Federal land.
Until recently, current law, regulation, and policy has worked well. The Federal Land Exchange Facilitation Act, which we helped to develop along with you and other members of this Subcommittee, has made some significant improvements to the process.
Page 26 PREV PAGE TOP OF DOC We are, however, concerned about several recent developments in BLM's land exchange process. First, we're concerned about the newly instituted directive which relinquishes a BLM State Director's authority to approve exchanges if the value of public lands in the exchange is more than $500,000. The directive requires that Washington, DC staff approve exchanges based upon an additional level of feasibility, analyses, and issues papers.
Second, we are also concerned about the increased popularity of competitive exchanges, or BLM's intent to auction unwanted Federal lands to the highest bidder. As a steward of the land, BLM has a responsibility to get the best deal for the public when disposing of land.
The best deal means more than just money, Mr. Chairman. Exchanges should be driven not only by BLM priorities, but also by community priorities, including development planning, infrastructure needs, open space needs, access needs and the like. To auction a parcel could result in an outsider who has no interest in the community's needs acquiring the parcel simply because he or she was willing to pay the most.
And while we certainly have a lot to agree with with Commissioner Gardner and his very unfortunate situation, with regards to the appraisal process, Western Land Group has generally been pleased with the arbitration provisions.
Prior to FLEFA, there was no arbitration and many exchange valuations were decided entirely by the BLM or the Forest Service. They were both a principal in the transaction, and also the last word in the transaction. FLEFA' arbitration provision has been a helpful tool to resolving disputes involving value.
We also suggest that the amount allowable under Section 206(h)(1)(A) of FLPMA be increased from $150,000 to $500,000 to allow utilization statements of approximate equal value, rather than full appraisals in appropriate situations. This would help reduce the backlog of appraisals and appraisal reviews.
Page 27 PREV PAGE TOP OF DOC On balance, Western Land Group believes that BLM's exchange process has worked fairly well. However, we do have two recommendations. First, the Federal Land Policy and Management Act requires that land be exchanged for exact equal value. Otherwise, cash equalization payments must be made. FLEFA permits certain waivers of this requirement.
However, the BLM often doesn't have access to the cash equalization dollars without coming back to the Congress to get specific appropriations. We recommend that Section 203 of FLPMA be amended so a portion of the moneys received by the Secretary of Interior from the sale of public lands be placed in a special fund for cash equalization purposes.
And finally, while we're a great supporter of well-crafted and well-managed exchanges, we recognize that exchanges are not a panacea and can't entirely substitute for purchases under the Land and Water Conservation Fund.
Thank you for this opportunity to speak to you today, Mr. Chairman.
[The prepared statement of Mr. Glass may be found at end of hearing.]
Mr. HANSEN. Thank you, Mr. Glass, for your excellent testimony.
The gentleman from American Samoa.
Mr. FALEOMAVAEGA. Mr. Chairman, thank you. And I want to offer my personal welcome to Mr. Shea, the Director of the Bureau of Land Management for his presence and also our friends from Utah.
I would be remiss, Mr. Chairman, if I do not offer my congratulations to you, and as an alumnus of the University of Utah and the Mighty Utes, and their capacity to be among the top four now in the NCAA competition. I don't know if you're aware, Mr. Chairman, but the Ute tribe from Utah borrowed this word Utah from us, because the word Utah in my language means mountains. And I understand it's exactly the same meaning among the Ute tribe, the word Utah. So you actually borrowed this word from us, so you might want to carry that on to the members of the Ute tribe in the State of Utah.
Page 28 PREV PAGE TOP OF DOC Mr. Shea, I appreciate your testimony. I do have some questions if you could help us with it. I notice that we have basically two Federal statutes and a series of regulations that were instituted, I think, in 1993: the 1976 law and the 1988 law. And then we've got these regulations that were instituted in 1993.
Do we need to take any steps currently as far as the Congress is concerned to make improvements on these statutes, or maybe we just need to wipe them all out and start with first base again. Or what do you suggest that we ought to do to make improvements in the process?
Mr. SHEA. You can go back to 1785 when Thomas Jefferson and James Madison started the cadastral survey. Because the United States was faced with the prospect of frontier lands and how to manage them, there have been, almost on a decad basis, different political/economic problems associated with available public lands. And each generation, indeed each Congress, has probably thought of a different way of solving the problem.
At the end of the day, it strikes me, as the Director of the BLM, what I need to do in terms of my stewardship is to facilitate an orderly process that will ensure the taxpayers receive the value for their lands while, at the same time, making the necessary accommodations at the local level.
There's always going to be a give and take on that. You could take an arithmetic approach of two plus two is four and that would solve the problem at the local level. But as you move up the chain of government to county and State and Federal, I think you move rapidly into algebra and into calculus where the variables can have an enormously different impact, depending on which statute or which regulation you're doing.
I have before me the Federal Land Acquisition Act or regulations, Uniform Appraisal Standards, and you can see that it's not terribly thick, but it's very complicated to read. And then I have the private sector's appraisal standards, a little bit thicker, and actually a little bit more complicated.
Page 29 PREV PAGE TOP OF DOC So I don't think there is a single solution to this. I liked the suggestion that Mr. Glass made that BLM, as other Federal agencies, be empowered to retain some of the proceeds of exchanges for cash equalization purposes under a special fund. I think that has some merit.
But I think to go in and throw everything out and invent whole cloth again is simply going to delay the process further.
Mr. FALEOMAVAEGA. What is your opinion of Mr. Hanson's thinking that the whole situation that we're involved in here is really not an economic issue, but a political one, and that maybe it requires a political solution?
Mr. SHEA. Well, I do think Congress ultimately has the authority through legislation to do what they will with the property and be held accountable in the election process. That is the ultimate solution. I mentioned in my opening statement that we transact 50 to 60 land exchanges a year involving anywhere from 150,000 to 300,000 acres. Many of those transactions are small, isolated pieces that we need, in my judgment, to expedite so that you don't delay solving problems at the local level.
But once you get into rapidly developing areasLas Vegas is a good exampleand the prices are literally going through the ceiling, I think we have an obligation to make sure that the taxpayers are getting a just return on their property.
Mr. FALEOMAVAEGA. I noticed in your statement you mentioned that you have only approved about 70 or 80 land exchanges last year. How many do we do on an annual basis? I mean, how many applications are submitted as a whole?
Mr. SHEA. I couldn't tell you how many. There is no submission. What happens, if you'll see on the chart
Mr. FALEOMAVAEGA. Some are ongoing, I know that. Right.
Mr. SHEA. There's an exchange proposal and it's usually made to the district manager or the State director. And I can get for you a guesstimate there, because sometimes that might be as informal as somebody walking in the district manager's office and saying you know that 35 acres over in the north quarter, we'd like to see if we couldn't do some exchange.
Page 30 PREV PAGE TOP OF DOC Mr. FALEOMAVAEGA. Yes, I think it would be helpful for the record if you could submit that for the record, if it's all right, Mr. Chairman.
Mr. SHEA. I will do that.
The BLM completes an average of 60 exchanges annually. We estimate twice that many are proposed each year, but for one reason or another are not pursued. The usual reason for not getting beyond the proposal is one of the parties in the pre-negotiations decides not to pursue the proposal further.
Mr. FALEOMAVAEGA. I saw the chart here. And I am sure the Chairman and I feel sometimes too, whenever we talk about regulations, there is a chilling factor that comes in. And when you say about the complexity, and then when you add the regulations to the laws, it just makes it even more complex. Am I wrong on this? I look at the chart. This is what we go through by doing a land exchange process.
Mr. SHEA. Right. But again, I would point out that where there are two willing parties, that process can move very expeditiously. Where the problem arises is when the public, as is their right, reviews the proposed exchange and raises substantive questions as to value, as to endangered species, the system, as it's presently designed and as I believe has many safeguards to it, does slow the process down. And it does involve oftentimes a negotiation back and forth.
I was interested with Commissioner Gardner's comment that he was unaware that there was a possibility of negotiation because it's clearly laid out in the regulations that I cited in my opening testimony that you can have negotiations to resolve disputes.
Mr. FALEOMAVAEGA. How does a national institute of appraisers or national foundation or association really come out with a very accurate assessment of what an appraised value of a property, because it seems in hearing from our friends here, that's where the problem lies. It's such a subjective
Page 31 PREV PAGE TOP OF DOC Mr. SHEA. I think you put it quite well in your opening statement when you said that the appraisal is an art form, not a science. And just as in science, we could verify and duplicate something. I think I could take two appraisers out on the same parcel of land and in some instances, come up with widely disparate values. And that's where I think the chairman's observation that, in many ways, it's a political question then as to what would be a fair exchange for the taxpayers to accept in some instances.
Mr. FALEOMAVAEGA. And I think that's where the problem is. You don't think that we ought to do any changes in the current law to make it more effective?
Mr. SHEA. Well, like I said, I like the idea of having some funds set aside so that we could do equalizations more expeditiously than having to wait for a Congressional cycle for approval of additional funds to have those equalizations.
The chairman and I have discussed the concept of a land bank, but again, that is a question for Congress to address. We certainly will be working with different national institutes and different Members of Congress to see if there aren't some things we could do. I'm not saying we have a completely defensible system. But I'm just saying that if we were to remove it in its entirety, we would be, I think, in a very difficult position.
Mr. FALEOMAVAEGA. And it's just as difficult even to establish a national standard for even an appraisal process.
Mr. SHEA. Well, again, I think we have a very good establishment in the Uniform Appraisal Standards for Federal Land Acquisitions. Again, it's not something that my 6th grade son could sit down and read and understand, but it is, with the people who practice quite often, a very good guidance about what they need to do to facilitate these exchanges.
Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.
Mr. HANSEN. Mr. Hanson, did you want to comment on some of this statement?
Page 32 PREV PAGE TOP OF DOC Mr. WOODWARD HANSON. Yes, sir, I would. With almost 20 years of field experience as an appraiser who focuses on eminent domain litigation valuation, I am often asked on the witness stand, Mr. Hanson, isn't it true that appraising is somewhat more of an art than it is a science. And my answer has always been, well, I guess that all depends on who you hire.
I would strongly suggest that the competency provision of USPAP takes care of that at the Federal level, and segueing into the comments made earlier by the Director, I looked closely at the BLM 43 CFR 2200, and their standards exceed industry standards. I can give you examples, but I won't do that unless I'm asked to.
You have the Uniform Standards of Professional Appraisal Practicewe call it USPAPwhich is created by the Appraisal Standards Board of the Appraisal Foundation as a result of the S&L crises of the 80's. Then you have the Uniform Land Acquisition Policy of the Interagency Office of 1992, and then you have CFR 2200. So you have layers and layers of standards and supplemental standards.
But what I really think I can bring to this discussion as a result of my background in eminent domain and the case law that deals directly with these topics are some examples. And before I begin, I would remind you that the BLM land transaction process is not an eminent domain model; it's a voluntary transaction model.
But what I hear are people complaining about scope of project influences. That's a Federal rule, State rule. For example, if the government designates a property as a protected ecological habitat and then goes in and buys it and alleges that it's value has diminished as a result of its own policy, then that by law is something that you should disregard. The scope of project rule says as an expert, as an appraiser, you should disregard any decrease or increase in value caused by the project, solely by the project after its announcement.
I keep hearing issues that relate to, at least, Mr. Gardner's concern of condemnation blight. Their property was affected by issues of blight caused by public policy, and therefore, they couldn't achieve just compensation from their viewpoint.
Page 33 PREV PAGE TOP OF DOC I hear earlier testimony about why can't sales of small tracts of land be used to value large tracts of land. Well, folks, that was the S&L crisis. We've been through that once. Five-acre, 10-acre comps are not relevant data points to be used in the valuation of 600, 1200 acre tracts without doing a discounted cash-flow model, which includes a lot of variables like absorption and retail pricing, et cetera.
Otherwise, you are going to get a number that's called gross retail sales potential, not market value, and we've already fought that battle in the 80's down there in Texas. So I would caution you, don't go in that direction because that's not where you want to do.
And I would comment finally that the land valuation process, particularly in relation to the transaction or swap, requires a tremendous amount of due diligence on both parties. And particularly with regards to the issue of the noneconomic components of property.
The Federal agencies have clearly opined that they will not compensate for noneconomic elements in property valuation. And until Congress can take a strong initiative on this particular issue, we are going to continue to face this stumbling block.
Mr. HANSEN. Thank you very much. Probably one of the most complicated issues that we ever face around here is this one. We've talked about it; every year for 18 years, we've had a hearing on this, and it becomes very frustrating. I could write volumes about the frustrations that people have, with the BLM, especially the Forest Service, Reclamation, you name it, Park Service.
General principles, I would like to get a lot of inholdings out of parks. I'd like to get some inholdings out of BLM ground. It just makes good public policy to do that. I always worry whether the Democrats are in control down on Pennsylvania Avenue or the Republicans are in control. It comes into a fudge factory, in a way. And people become very defensive. Basically, these laws come from us and I have to say that sometimes the interpretation of the laws leave me a little cold, but still that does happen from time to time. So I would hope that people wouldn't become defensive.
Page 34 PREV PAGE TOP OF DOC But you know, I look at things like Commissioner Gardner brought up, and I've represented in my 18 years in Congress, 16 years I've represented Washington County, and I cannot believe the problems that have been created down there on this thing of the 1973 Endangered Species Act.
Mr. Doyle was in to see me the other day. I could name 20 people from that area that are super-frustrated, and I share some of those things. Somewherethat's what I said earlier, and this is the cop-out argument, is fine, as Mr. Glass pointed out, when we get to a certain point we say fine, we'll just put it in legislation.
He was talking about a land exchange on Snow Basin. What that was about is Jack Ward Thomas, the head of the Forest Service at the time, came in and sat in my room and said, ''Mr. Chairman, there is no way on earth I can make this land exchange and jump through all those hoops in time for the 2002 Winter Games and Utah is going to look like a bunch of dummies. Therefore, would you do it by legislation.'' And we did.
Even at that, it was a frustrating experience. So my first question to him was, was there any opposition to this. He said, oh, none whatsoever. Boy, was he naive. There was even a great movie star lobbying in front of my one office saying how bad it was even though he had his own. But I won't go into that.
Anyway, carrying that on, I would have to respectfully disagree with the Director, and I'm not sure I am disagreeing with you at all, but I think there are some places we can streamline this. Just look over at that chart over there. It's fraught with problems, in a way. Every time there's another person involved, then we get personalities involved and they have their own feelings in it.
Mr. Gardner points out, and I think of half the people in Washington County and Iron County. I remember when our mutual friend, Mr. Babbitt went into Iron County and said because we have found the prairie dog in there, your ground is now worth $600 an acre. Well, that didn't sit too well with the Governor of the State or myself as Congressman from that area. This is ground some of those people have owned for many years.
Page 35 PREV PAGE TOP OF DOC So I'm sure that Alan Gardner sits there, he and family, taking him out of his role as County Commissioner, but put him in his role as a landowner. And all of a suddenthey've owned that ground for generations. Now, all of a sudden in 1973, Congress comes along and says wow, we just found this little thing called the Desert Tortoise.
Of course, some of us debate where it's very healthy in Washington County, but very sick in the Mojave area, why we try to keep both sides. But I won't get into a Fish and Wildlife debate here. But why is it now that Mr. Gardner's ground is worth less money than that? He didn't do this. It had nothing to do with him.
And Director Shea, in my humble opinion, that constitutes a taking. They took the man's ground that was worth x amount of dollars, whether it be Mr. Gardner, Mr. Doyle, a hundred of them down there, who fall in that category.
Another thing that always bothers me is every time somebody calls, they find an archeological site on it. I personally have gone down, and I go down there about every other month, and tried to find some of these archeological sites. I wish whoever finds those would go with me one of these days and point it out to me. Or somebody prayed there at one time. Oh, I don't know who it was, whether it was those early Mormon pioneers or whether it was an Indian tribe or something. Then we constitute a religious issue.
Now someone's got to cut through this stuff. Now I don't mean to take anybody on here, but I really think we've created ourselves just a ton of problems on how to handle some of these issues that we have.
And then, of course, the folks who work for you, Mr. Shea, we always like to criticize them. That's part of the fun of this job, you know, is taking on those areas, because we get it every day from the public who feels it's our fault. But somehow I honestly think we should come up with some recommendations to do that.
Did you want to go again? I've got a few more things to say, but I'll turn to you and you can take the second round, if you like.
Page 36 PREV PAGE TOP OF DOC Mr. FALEOMAVAEGA. Just one a half questions, Mr. Chairman, if it's all right. I wanted to get back to Mr. Shea again, if it's all right.
And I guess in a roundabout way in your statement, Mr. Shea, you've given us what steps, as the chart also indicates, are taken to do the land exchange process. Does the Bureau have some kind of a division of categorizations and say that this is from a small landowner that wants to do a land exchange to a corporate, to a State, and to a county so that the process doesn't get clogged up?
I hear from Mr. Harja even the small landowners get bogged up with this whole process, and I'm just curious why couldn't it be expedited for the situation of an individual landowner as compared, I suppose, to a State-owned land.
Mr. SHEA. On December 23, 1997, we issued a memorandum which allowed for a second review by a State director or by the national office. The purpose of issuing that was to try to do exactly what you are asking about, and that is separate out those small noncontroversial exchanges.
Let me give you an example. In central Utah, there was an 80-acre parcel that had a particular plant that was found nowhere else in the world. So if we had allowed an expedited exchange, it would have been entirely possible for that parcel to have been exchanged without anybody making an assessment of the scientific value under the Endangered Species Act of that plant.
So what we are encouraging our people to do at the local level is to come up with those exchanges that can be done as expeditiously as possible. And as I said, on this chart, it flows very quickly if there is no controversy. Now, unfortunately, we live in a time of great contentiousness, particularly when it comes to land questions. And that's where it has bogged down.
Now, Congress may well come along, either with specific legislation authorizing exchanges or with a streamlining of the process. That's your authority. I would probably be here as the Director arguing against making it too efficient because I think some of the abuses that were mentioned in the 80's would arise again very quickly. And one of the things that this process, I believe, has done is avoided the taxpayers' losing on the exchanges.
Page 37 PREV PAGE TOP OF DOC Mr. FALEOMAVAEGA. Boy, that reallyyou say that this one parcel of land had one plant in there that is the most rarest in the world.
Mr. SHEA. Well, there was no other place. The reason I'm familiar with it was the Nature Conservancy eventually worked out an exchange and preserved it through an exchange process that I think took about two and a half years.
Mr. FALEOMAVAEGA. So in every procedure whether it be through individual, corporate, county, State, we've got the Endangered Species, you have the scientific community that has to go in there and make a thorough check of the
Mr. SHEA. They have to make that assessment, yes.
Mr. FALEOMAVAEGA. And how long does it take?
Mr. SHEA. Again, it can take a very long time, or it can be done quickly. That's one of the areas where our inventorying the flora and fauna on public lands would be of assistance. We are creating an Automated Land Mineral Records System, ALMRS, which will allow us to retain in digital form information such as that. So I think in the future that process can be done more expeditiously. But right now we don't have those assessments in many areas and therefore, they have to be done as the proposal was done.
The average is 18 months to complete a land exchange. The inventory and clearance work required by regulation is the most time consuming portion of the process. The negotiations and agreement on land value can also add to the length of the transaction.
Mr. FALEOMAVAEGA. I suppose this adds to my sense of frustration right now. I've been following this issue for the past 7 years in trying to get a better process of giving Federal recognition to some 100 Indian tribes that are still not federally recognized. And some of these tribes now, over 100 years, they are still not considered Indians, which in my mind is an insult and I resent it very much the current procedure, the way it's done.
Page 38 PREV PAGE TOP OF DOC And I looked at the Indian tribes almost like Mr. Gardner here and the others, going to such a tremendous amount of money and then all to no avail. I mean, just without any real sense of success in going through the process.
I am trying to get in my mind, Mr. Shea, what in your proposed procedure with these regulations, what do you see now as the average time factor that will take really for a land exchange to take place?
Mr. SHEA. I'd have to, if I may, give you an answer on the record written for that, because it would have to be just a guesstimate. But there have been some exchanges that have been accomplished in less than a year, but most of them take around 18 months or more.
Mr. FALEOMAVAEGA. There was discussion also about the public interest value. I am a little confused on that. Can you shed some light on this, the public interest value of the land exchange, I suppose.
Mr. SHEA. I haven't used the term public interest value. What I have been using as a term is the fiduciary duty I feel to the taxpayers, make sure that land that they've, in a sense, acquired over the years is not turned around and then an exchange value of x is given to it at the exchange date, and then four days later, it becomes four times x.
Mr. FALEOMAVAEGA. I suppose in layman's terms, what I would look at the public interest value meaning is that making sure that the public's property is protected by the government, that you don't get shortchanged. And I wondered, maybe Mr. Hanson can help me out if there is, if we could properly use the term.
Mr. WOODWARD HANSON. Sure, yes, sir. The term public interest value has not been well-defined in appraisal literature. It's generally recognized as the increment over market value that a property may command, as a result of special and unique cultural, ecological features.
Page 39 PREV PAGE TOP OF DOC Mr. FALEOMAVAEGA. Mr. Webb, you cited the Dell Webb land exchange as an example in Las Vegas. Would you say that public interest value comes into play with that.
Mr. WOODWARD HANSON. I am not familiar with public interest value having any context to the Dell Webb exchange, sir. It was more an issue of a propertyI think you were on to something that I think is brilliant, is there needs to be a recategorization of these lands.
One obvious set are BLM lands that are located in urban fringe areas need much different due diligence than do lands that are in remote rural areas. If I have a piece of property that's on the edge of Las Vegas that's growing at 8 percent a yearI was just there working on the CalNev Pipeline, and I see Henderson, Nevada busting at the seams and I got 4,700 acres next to it, I'm going to take a real darn close look at what the value of that is.
I know my institutional clients would make me do that, and I would certainly expect the government to do the same thing on behalf of the American people.
Mr. FALEOMAVAEGA. Well, if I knew that a Federal highway was going to come there 10 years from now, that you want to purchase all the land there that belongs to BLM, knowing that something very good is going to come through there. So public interest value becomes less valued in the public interest. I mean, the public's interest in terms of the property owned by the public just was not taken very fairly, I guess.
Well, now that I'm more confused than ever, Mr. Chairman, I just wanted to ask in terms of the examples you cited, Mr. Chairman, I can appreciate the problems that sometimes we have. And I think, Mr. Shea, I don't want to put the onus in saying that it's the bureaucratic mess that is causing this whole problem. But I guess it comes right back to us here in the Congress. And if it's us, we want to fix it. But we don't want to continue spinning our wheels and continuing having hearings like this and not solve the problem for the next 10 years.
Page 40 PREV PAGE TOP OF DOC Mr. SHEA. One of the things I would suggest is that there is no single solution. However, your comments and questions have led me to a concept that I would posit for the Committee's consideration. When we do move forward to form this national exchange team, it would be entirely possible for them to prepare an annual report which we would give to you so that there would be an approximate source of data about exchanges that the Congress could review, and then in its wisdom decide whether or not something legislatively needed to be done.
Mr. FALEOMAVAEGA. I certainly have no objection to that, Mr. Chairman, and I hope that maybe that can be done. But at the same time, we want to encourage input from our friends at the State and local levels so that if they're frustrated, we want to hear about it. And I think our good friends from Utah are very, very frustrated with the current process. At least, that's what I gather. Mr. Harja.
Mr. HARJA. Yes, if I could, to further your confusion about public interest value, if I could. We were discussing, the Director and Mr. Hanson were discussing the changing face of the urban areas and difficulties there.
What I was trying to suggest is that this is also occurring in the rural areas, in the areas that are the parks and the scenery and all the pretty stuff that we all want to preserve, and the Endangered Species Act animals.
Mr. Hanson mentioned a second ago that he called it the increment above market value. I think the debate from our view is, is in fact that market value or not. And in fact, what I was trying to say with my examples of value is people are buying these lands for that purpose, and we call that economics, supply and demand.
That is the debate. And I agree with Mr. Hanson that if the Congress could assist us with that debate, help the appraisers out and help us understand, that would be of great value.
Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.
Page 41 PREV PAGE TOP OF DOC Mr. HANSEN. Thank you. Mr. Harja, I hope everyone realizes, his responsibility is to do some land exchanges for the State of Utah for the children as far as trust lands. Some of our other States in the West do a much better job than we do. I think we dropped the ball maybe 20 years ago when New Mexico and others got on the ball and did something.
We have an awful lot of children there and it costs an awful lot of money to take care of their education. And Congress wisely put some of that in trust lands, but we don't have the best lands.
How is your exchange coming that we have talked about ad nauseam for the last 10 years?
Mr. HARJA. With great anticipation, we came to Congress in 1992 and 1993 asking for a process that would help us exchange those lands out of the National Parks, Forests, and Indian Reservations and acquire some properties that were about to be developed, and we could generate the money to put in the permanent fund to spend on education.
The Congress at that time was not willing to look at our estimations of value, our sense that it is approximately equivalent. And it chose instead to choose a process of appraisal. And Mr. Ventos sat here and said we would like every nickel to be accounted for.
Well, it made some sense to us. Maybe in my naive atmosphere at the time, I said we can do this and appraisals shouldn't take too long. Instead, as I mentioned, as we started into it, it was a sense of prejudgment, a sense of these lands are out there only to hold the earth together, as I recall was the statement. And we started to feel uncomfortable.
We negotiated a process where the appraisal industry, four highly qualified people that we jointly chose, would work on this problem. And I have to say, I think those four felt overwhelmed by 500-and-some-odd tracts scattered all over the State, and these are 640's, these are not 10-acre things. They are rural, they are remote, they have minerals.
They had to examine 20 different minerals: coal, alabaster, ad nauseam. We had to hire not only four appraisers and a research assistant to go out and look at all the comparables. We had to hire a mineral appraiser because we had 175 tracts where we only owned the minerals. And he had to hire 15 different experts on minerals. That process alone cost us about $1.5 million.
Page 42 PREV PAGE TOP OF DOC And we're nowhere near completing it because, despite our efforts, this question of what is the market for rural areas came up and theI believe the USPAP allows for these sort of things to be considered, that Mr. Shea mentioned. The Federal book here, this yellow book, does not allow that. And to us, that's simply ignoring a common issue.
So we're stuck right now. We had to finallythe State had to sue and we're now in negotiations with the Department of Justice to try to conclude this. And right now, assuming all goes well for us in courts, we're looking at probably 10 years from start to finish to get an exchange of 500-and-some-odd parcels done. I am hopeful we can simply mediate that and be done soon.
Mr. HANSEN. Mediate that and be done soon.
Mr. HARJA. Mediate the dispute.
Mr. HANSEN. Soon? How long do you say you've been on it?
Mr. HARJA. I used to estimate days and months. Now I don't do that anymore. I just say soon.
Mr. HANSEN. If Roll Call was here, they'd put that in as the Joke of the Day. But thank you for your good work, though. I know Mr. Harja works very diligently on that.
Mr. HARJA. We intend to conclude this. We intend to get this done. It's in our best interest. It is just frustrating that the process turned out to be so large
Mr. HANSEN. Well, you've got the monument in there. Of course, the monument is almost nothing to a lot of us, even though the delegation takes the point that it's reduced the WSAs down to 2.8, rather than 3.2. That doesn't really matter much either way. But I'd sure like to see some of that resolved, and I think most of the citizens in the State of Utah would.
Page 43 PREV PAGE TOP OF DOC Every time they pick up their property tax notice and see how much their mill levy goes to education when we should have taken the vision of a very great Governor by the name of Scott Matheson and gone ahead and done that some time ago. I wish we had blocked that out. We'd have most of this out of our hair when he came up with that Project BOLD which should have been done years before.
Mr. Glass, you had a comment.
Mr. GLASS. Thank you, Mr. Chairman. Just to clarify a couple of things. I'm not an apologist for the exchange process at all. I know that there are certainly some subjective elements to appraisals, but because of FLEFA, the agencies are no longer arbitrary, and that's because of the arbitration provision.
We've been through one arbitration. Out of over 100 land exchanges, we've taken one case to arbitration. In that case, the government lost big. They were accused of being arbitrary and capricious and the arbitrator determined such.
One of the main problems with completing exchanges, Mr. Chairman, is that the staff reviewers often lack the self-confidence to review people's work, like Mr. Hanson here, and approve it without a lot of squirming and teeth gnashing and fingernail biting.
However, I want to compliment Mr. Dave Cavanaugh, the Chief Review Appraiser here in Washington, DC, for some very competent work that he did on behalf of the City of St. George in Washington County. He was instrumental in resolving some very difficult questions concerning tortoise habitat that was owned by the City of St. George.
Without Mr. Cavanaugh's intervention, I don't think we could have possibly resolved this issue, with all due respect to the State staff in Utah. I want to point out that a lot of it is self-confidence on the part of these review appraisers. Particularly, when they get into high growth areas. They are used to going out and appraising farms, then all of a sudden, they are on the edge of a real estate boom like the one case we talked about in Las Vegas, and they are somewhat out of their bailiwick.
Page 44 PREV PAGE TOP OF DOC And if there is ever an appropriate role for Washington, short of arbitration, it is getting competent people like Mr. Cavanaugh out there to try to address some of these issues before the entire transaction falls apart.
Mr. HANSEN. Mr. Hanson, in regard to Mr. Glass's comment, as we try to somewhat streamline this and make it more efficient, one of the frustrations we find in Washington, DC is we can never find somebody who can make a decision. We are always tryingsomebody is going to cover himself, and I'd better check further up. I spend most of my time working on military issues. I finally have to get to the Secretary or his Deputy or a Secretary of the Army, Navy, Air Force, Marines to get a decision. And it's a frustrating experience. And you find that all over the Federal Government.
I noticed you have MAI behind your name. Would you, for the record, tell us what that is.
Mr. WOODWARD HANSON. MAI is a professional designation that is owned by the Appraisal Institute and it stands for Member, the Appraisal Institute. What it means is as a professionally designated appraiser, we have stringent educational requirements, stringent ethics and review requirements. We have a disciplinary process. We have a comprehensive exam. We have demonstration and report writing criteria.
It means that the standards that we have set for membership into our organization greatly exceed those minimum standards that were defined by Title 11 of FIRREA during the creation of the State-certified appraiser.
Mr. HANSEN. Are you of the opinion that the Federal Government and those who handle public lands have the qualifications to do it?
Mr. WOODWARD HANSON. Sir, to be sure that I understand your question correctly, do you mean those who are currently doing the appraisals on behalf of BLM, et cetera?
Page 45 PREV PAGE TOP OF DOC Mr. HANSEN. Realizing they have a lot more going thanI mean, they are not private business people and they have a lot of considerations, do you think that they appraise the ground in the way that you would or someone from the private sector would?
Mr. WOODWARD HANSON. In my review and investigation in preparing for this hearing, I learned that BLM has a policy or history of outsourcing appraisals. And I've learned that oftentimes they use members of my organization, so to speak. So I think the policy is a good policy in that they are going to the people with the greatest experience and educational backgrounds to solve these problems.
But what I hear today are not appraisal problems that are unique. These are appraisal problems that I face every day in my business. I have institutional clients that are involved in land on the east coast of Florida next to agricultural preserves and fringe areas that need plan amendments and infrastructure extensions. And we are trained, we have the tools necessary to lead to accurate conclusions in these settings.
Mr. HANSEN. Well, what I'm getting at, and I guess this is also for the Director, is a lot of situations we have is somebody in Florida, Utah, wherever it may be, an appraiser with your qualifications does something and it's all thrown out in Washington. Case after case, this is thrown out, the other one is thrown out. Why? What criteria are they using at this level that didn't fit at that level?
Maybe the Director would rather respond to that.
Mr. SHEA. Again, I agree with Mr. Hanson. Many of the more complicated land transactions that we do we outsource to the professional who we find to be the most highly qualified. And quite frankly, it's a tension between trying to push the decisionmaking authority to the local level to allow them to make expeditious and yet just decisions, while at the same time having the opportunity in appropriate settings, to bring in the truly professional.
Page 46 PREV PAGE TOP OF DOC So I know that parties can disagree. Having been a lawyer for 23 years, I was often hired to create disputes perhaps where there were none. And we live in a society where we have that happen all too often.
But that's why I was saying in my opening comments, this is a complicated process that requires an ability to give local authority the right to make the decision, and yet, because it involves a trust obligation to the people of the United States, we need to have the most competent people like Mr. Hanson and other MAIs available to do it.
Mr. HANSEN. Is it BLM policy that the public always has access to the final approved appraisal before an exchange is completed?
Mr. SHEA. It has to have a 45-day comment or the exchange can't go forward.
Mr. HANSEN. I see. When some organization that comes in has an obvious built-in agenda which is particular to their group, but not really along with the will of the masses of people, is that taken into consideration?
Take for example, somebody who is really uptight, who has a save-the-slimy-slug type of thing. Therefore, they foul up a land exchange to save a slimy slug. The slimy slug is going to be saved over the direction of maybe 10,000 people, because of two people. Does that come into consideration?
Mr. SHEA. I guess we don't check the Fifth Amendment as to whether it's applicable to the slimy slug advocate or the ordinary citizen. That's part of the due process provisions of our Constitution.
Mr. HANSEN. But somewhere, someone has to adjudicate this and determine where is the value.
Mr. SHEA. Oh, I agree.
Mr. HANSEN. I mean, here we've got a community like Iron County, which is growing by leaps and bounds and they find two prairie dogs down there and it stops a huge amount of growth, even though people figured out how to move it safely to another spot. And yet it cost us millions of dollars to do it. Somebody's got to cut through some of this sometimes.
Page 47 PREV PAGE TOP OF DOC Mr. SHEA. Again, I think Congress, in terms of legislating standing in jurisdictional questions involving the Article 3 Powers of Adjudication, has that ability. There is an individual up in Idaho, Mr. Marvel, who has on our permit questionsthis is not a land exchange question, but on permits has quite regularly been suing the BLM and the Forest Service and we are obligated to go to court and defend the actions, which take a great deal of time and for the private permit holder, the livestock rancher or agriculturist, it's an enormous cost.
But I didn't write the Constitution and I wouldn't want somebody to say, well, if you have curly hair you get one right and if you have straight hair, you get a different right.
Mr. HANSEN. Specifically to the Spillsbury exchange, a letter was sent to the BLM by the Western Land Exchange Project, an environmental watchdog organization which initiated the fourth appraisal of this property and resulted in another delay just days before it was to be completed.
Now we've read the letter here and find nothing in it overwhelming evidence that would compel the BLM to conduct yet another appraisal. And I just wonder why it was such a big deal that the BLM responded to the Western Land Exchange Project. Does anybody want to respond to that, or am I getting too specific on something?
Mr. SHEA. I'd be happy to get something for the record. I am not familiar with that.
The BLM responds to every citizen or group that protests or comments regarding one of our decisions. We do not arbitrarily single out any comment we receive for a response. The reason we responded to the Western Land Exchange Project is they commented on the decision. We did not hold up the land exchange because of the Western Land Exchange inquiry. We needed to have an administrative record that conformed with lands being exchanged. Generally we will delay an exchange until the administrative record supports the management decision to complete the land exchange.
Page 48 PREV PAGE TOP OF DOC
Mr. HANSEN. I'd appreciate it very much if you would do that.
Mr. Glass, I had a question I wanted to ask you. You have told us that you oppose the development of a national exchange team, is that right?
Mr. GLASS. No, I did not. What I said, Mr. Chairman, was that I am concerned about the new directives of the BLM which relinquishes a State BLM Director's authority to approve exchanges where the value of the public lands to be exchanged is more than $500,000.
Mr. HANSEN. But you mentioned response time, if my ears heard me correct.
Mr. GLASS. And one of my major concerns about this directive is its removing authority or taking authority back to Washington instead of out into the states.
Mr. HANSEN. But you think there should be a time limit, Mr. Glass.
Mr. GLASS. I would love there to be a time limit.
Mr. HANSEN. And what would you propose? Is it fair to ask that?
Mr. GLASS. The thing that causes the greatest number of delays in most exchanges is public opposition, local public opposition, similar to some of the controversy that surrounded the Snow Basin Land Exchange. And it's that public process, when the public gets actively involved, that the process does slow down.
Occasionally, there are technical issues that slow the process down. For example, surveys. If an exchange is in an unsurveyed township or there are difficult survey problems, that can really delay an exchange, up to a year or two, given the small budgets these agencies have to go out and perform surveys.
Page 49 PREV PAGE TOP OF DOC And appraisals, for the most part, do not slow down the process unless they become contentious. And that is why the arbitration provision that you sponsored in FLEFA is so important.
If we could have some timeframes for review, I would welcome them, but I haven't called for anything specifically today.
Mr. HANSEN. Mr. Gardner, you commented in your statement about your land being appraised and appraised and appraised. How many times has it been appraised?
Mr. GARDNER. I think altogether the lands we've been involved with, we've had five different appraisals on ours and
Mr. HANSEN. Five different appraisals?
Mr. GARDNER. Two on our private and three or four on BLM that we are trying to acquire.
Mr. HANSEN. Over what period of time?
Mr. GARDNER. Oh, probably started 4 or 5 years ago now, I don't know. I lose track, it's been so long. But from the initial prevalue estimate, that would have been in 90we've been 2 years since we arbitrated or bargained for the agreement on our property, and so it's been at least 2 years before that when we started this process.
Mr. HANSEN. What was wrong with the five appraisals, that you had to have five appraisals?
Mr. GARDNER. Well, the first was the preliminary value estimate, and then that was supposed to be just upgraded to a regular appraisal, and BLM sent down another appraiser to do a complete new appraisal.
And that's where we ran into the problem, because he discounted the tortoise and gave us a low value. And we bargained there when we selected the BLM land to exchange for. We selected an appraiser off of their approved list who was MAI-certifiedall of the appraisers have been MAI-certified. He was extremely slow getting his appraisal completed. Both us and BLM were very frustrated with the time that he took. But he worked that process through. It was accepted by Mr. Widdoss, the review appraiser for BLM out of South Dakota, and then rejected at Washington. I think Mr. Cavanaugh rejected it because ofI'm not sure the total reasons there.
Page 50 PREV PAGE TOP OF DOC Mr. HANSEN. If there's ever an illustration of a fudge factory, it's Washington County. I would do anything to get that done if I have to stick it in an appropriations bill somewhere just to get the dang thing over with. Can't we get these things squared away somehow?
I'd like somebody to send me a list of what's holding things up in Washington County. Every time I turn around, there's another hang-up on that thing. It's just gone on and on.
Do you want to comment on that, Mr. Hanson?
Mr. WOODWARD HANSON. Yes, sir. You know, what I keep hearing over and over again is a private property owner who feels as thoughwho feels frustrations resulting from the process largely due to the amount of time and also the conclusions. And the value estimates are affected by the legislation or local policies that affect highest and best use and ultimately value.
And it gets back, once again, to scope of project influence. What I hear this gentleman saying, as a private property rights sort of perspective, is you can't downzone my property, and then value it on that basis before you buy it from me. And his frustrations are certainly fair.
So that's where I want to remind you, that's an example of where the Federal Government and its rules and regulations and legislation affect value. You can't have it both ways. You can't downzone or limit the use of somebody's property through an Endangered Species Act, for example, and then come in and tell them it's worth nothing. That doesn't get to just compensation, which is once again, an eminent domain paradigm, not a voluntary transaction paradigm.
But I would like to say one thing. One instance where the BLM system goes way in the direction of the benefit of the property owner is where it allows the property owner to select the appraiser. That is in direct conflict with Title 11 FIRREA where earlier legislators concluded that one of the causes of the S&L crises was the developer, the borrower, got to pick the appraiser. The fox was guarding the henhouse.
Page 51 PREV PAGE TOP OF DOC So that is an example of where the BLM system, I think, is in conflict with other existing Federal legislation, but goes in the direction of the landowner's interests.
Mr. HANSEN. Mr. Gardner, do you want to comment?
Mr. GARDNER. We were agreed to select the appraiser, but it was from a list of stipulated appraisers given us by BLM. And prior to their selection, we knew neither one of these appraisers, so you know, there wasn't anything there.
And that's the whole reason, I guess, this process came about, because the State Office of Appraisal initially right up front had problems with the value of the property because it was impacted by the tortoise, and we went around and around with that for over a year because we knew there was no point in even starting if we were going to be faced with Mr. McDonald's recommendations from the State level.
So that's why Mr. Duskin was used out of Oregon and Mr. Widdoss out of South Dakota because of the attitude that was in the State appraiser's office. And ideally, it should be just addressed there if we had someone that was reasonable to work with. We would prefer that. But with the attitude that was there, why that could not be accomplished.
Mr. HANSEN. Mr. Director?
Mr. SHEA. Yes, Mr. Gardner's right. We submitted a list and they chose from the list, so they don't have a unilateral right to name the appraiser in that process. Second, I do have a prepared response on the public interest value that I'll submit for the record.
And then, Mr. Chairman, there was a letter that was sent to you on March 10 in response to your inquiry about the land exchange and the appraiser. So I'll have copies of that, as well.
Let me make one suggestion on the endangered species question. It would be entirely possible to do a computation of what the purchaser of the property paid for the property with some return on that property if, by happenstance, it was found after the purchase to have an endangered species on it, so that you didn't get into this esoterica as to what impact the endangered species presence on that land had and would give some just return based on a calculation to the property owner.
Page 52 PREV PAGE TOP OF DOC But again, that would be a congressional type of activity that would perhaps expedite the process.
Mr. HANSEN. Mr. Hanson, in your opinion, if a property owner owns property for many, many years, and Congress passes a law like the Endangered Species Act, or the Section 404 of the Wetlands Act, and then the person cannot use the property for what he intended it for or proposed to sell it sometime.
In your opinion, does that constitute a taking?
Mr. WOODWARD HANSON. I wish I was a Federal judge and could answer that question frequently. That question gets back to this very complex issues of investment-backed expectations, which you cited, and which I would refer you to, the first English decision out of California and the Lucas Decision out of South Carolina. It gets to other issues related to reasonable economic use.
But there are too many more facts that I would need to know whether or not it constituted a taking. But it's definitely an intrusion into constitutionally protected private property rights. It, in my experience, definitely affects value and there becomes a pointand I have specialized in inverse condemnation actions over the years where the cumulative impact of the regulation is a de facto taking, yes.
Mr. HANSEN. Mr. Gardner, you tell me if this is true. I had somebody call me from Washington County who did not have the Desert Tortoise on their property and said the Fish and Wildlife physically put one on their property. Is that just one of the better rumors going around or is there any truth to that? Or do you know?
Mr. GARDNER. Are you talking to me?
Mr. HANSEN. Yes, sir.
Mr. GARDNER. I've heard a lot of rumors to that effect. I don't know that we can physically prove that.
Page 53 PREV PAGE TOP OF DOC Mr. HANSEN. You can't give us names or an admission from somebody or dates or anything like that.
Mr. GARDNER. No, I know that I'm very firmly convinced that all of the tortoises to the north of town where by coincidence, the HCP is located, are all transplanted tortoises from down on the slope.
I have a signed letter from one individual who ran sheep in the City Crick area, which is the highest concentration of tortoises in the area now, and they lambed their sheep there every spring. And when they're lambing sheep, they live with them out there and they never did see a tortoise in all that time. And so it's just been in the last few years that they've been there. So it's something we've done to ourselves as we've brought pets home from over the mountain.
Mr. HANSEN. Mr. Hanson, would you comment?
Mr. WOODWARD HANSON. I just would comment in Florida we have what is called portable Indian mounds, you know, where the Indian mounds are transported to your property and like the tortoise, being hypothetically placed. It's one of the many things that have been brought up in eminent domain cases I've been in. Somebody says if you're not careful, you know, we'll put an Indian mound on your property. And I happen to own a property with an Indian mound, so I'm very proud of that.
Mr. HANSEN. Mr. Faleomavaega.
Mr. FALEOMAVAEGA. I just have one followup question, Mr. Chairman. I am asking Mr. Shea if he could help me out. What exactly is BLM's procedure, let's say that Mr. Gardner is a willing donor, or wanted to do this land exchange with BLM. I get the impression from Mr. Gardner that these appraisals are given to him without any say on his part. And I was under the impression that the process is totally voluntary on both sides.
Could you help us? Is there a pool of appraisers that BLM just dips into and says this is what you get? Or do you go through a process with Mr. Gardner going through the list of potential appraisers that will be involved in the process? How does the BLM go about selecting appraisers in the process? Or does the BLM have their own appraisers?
Page 54 PREV PAGE TOP OF DOC Mr. SHEA. BLM does have its own appraisers, but given the volume of work and given the complexity, as Mr. Hanson pointed out, we do have a list of qualified appraisers that are available on a contract basis. And in Mr. Gardner's instance, a list was prepared of available ones that would be acceptable to BLM, and he was given the opportunity, as I understand his testimony, to select one that would then be used.
Now, there was, as he pointed out, a dispute with the State appraiser as to how calculation would be made. So once the initial exchange proposal has been put forward, you then move to, all right, how are we going to appraise this process, and at any given juncture on that chart you can have a dispute.
And quite frankly, to go back to a comment the chairman was making, that chart inoculates the BLM against a court deciding that somebody's property was improperly taken, and that's one of the reasons we have so many safeguards built into it.
Mr. FALEOMAVAEGA. And then the dispute would end up with four or five appraisers and Mr. Gardner's
Mr. SHEA. But let me just get clear in my own mind, I understood him to say that there were two appraisals on his property and three appraisals on the BLM property that was going to be exchanged, for a total of five, but not five on any one single piece of property.
Mr. FALEOMAVAEGA. And the procedure sometimes, let's say that if it takes place in Utah, you get appraisers from Florida or from other states to conduct the survey?
Mr. SHEA. In the instance of Washington County, there was an appraiser from North Dakota or South Dakota. And then I also believe there was an appraiser who came in from California.
Mr. FALEOMAVAEGA. Now I would be very leery of getting an appraiser from Hawaii. You talk about inflated real estate business going on over there. I would question whether that appraiser is going to give me a fair bargain as far as the negotiations taking place.
Page 55 PREV PAGE TOP OF DOC And these appraisers, are they all members of MAI or are they different associations? Is there competition among appraisers in the different associations, just like the AMA and others?
Mr. SHEA. There's definitelyand I'll let Mr. Hanson discuss the competition within his own trade, but there are definitely.
Mr. FALEOMAVAEGA. Mr. Hanson, can you help us on that?
Mr. WOODWARD HANSON. Yes, sir. Thank you.
Mr. FALEOMAVAEGA. Sure, absolutely. There is definitely competition among organizations that designate professionally trained appraisers, so the answer is yes to that.
The other comment I wanted to tell you is the notion of an approved appraiser list is not unique and peculiar to BLM. Every regional bank that I know of has an approved appraiser list, and what it is is like a prequalifing effort to ensure that the best and most qualified people are on this list.
Now, when I work for regional banks in the Southeast, I'm on various lists, I'm not allowed to talk to the borrower before I'm engaged by the lender or I have violated Federal law. So my corollary is still accurate. It is still an advantageous element of the BLM policy to the property owner to be able to pick from a list of prequalified skilled appraisers to represent them in the appraisal process.
And I would say one more thing. USPAPbecause I know you are sensitive to bringing in an appraiser from Hawaii to do something in Utahthe Uniform Standards of Professional Appraisal Practice has a competency provision, and the competency provision deals with not only having adequate education and experience background, but geographic competency. So there are protections within existing appraisal standards to mitigate or avoid those sorts of problems and punish those who don't comply.
Page 56 PREV PAGE TOP OF DOC Mr. FALEOMAVAEGA. Maybe my using the word competition is not proper, Mr. Shea. But besides the MAI, how many other institutions or associations that make up the appraisers in the country?
Mr. WOODWARD HANSON. There's numerous. There's, I would dare to guess, an excess of probably 25 to 30, and out of that number, the critical mass is really associated with what I would estimate are one to three organizations.
Mr. FALEOMAVAEGA. And you don't have a national association like the AMA then? I mean, you have three big associations or groupings.
Mr. WOODWARD HANSON. Well, the Appraisal Institute is the largest of them all. We are the 900-pound gorilla, so to speak. And with 20,000 members, we are widely recognized as the leading authority on real estate appraisal. We are currently involved in a process now where we are working with allied organizations like the Farm Managers and Rural Appraisers and the American Society of Appraisers, trying to help discuss and create contribution to this emerging public policy initiative.
Mr. FALEOMAVAEGA. Mr. Shea, I don't sympathize with the problem you are faced with. So with all these 20,000 appraisers and the 900-pound gorillas and two 200-pound gorillas, how do you go about in putting in such a way that you have competency and fairness among the appraisers that will be involved in the process?
Mr. SHEA. At the end of the day, a Federal judge unfortunately will, if it's pushed to that extent, say whether or not we were fair in the process. But let me try to illustrate what I think Mr. Hanson is getting to, and it's a personal problem. I call it Pat's basement problem.
We have a house that we designed in Salt Lake. Because we can get a 1.5 point difference in our mortgage, we are going through the process of having it appraised for refinancing purposes. Now, the ground floor of this house is in the side of a hill; we built on a hill.
Page 57 PREV PAGE TOP OF DOC One appraiser comes in and says that that's a basement, and therefor, any of the floor on that basement level is one-half the value per square foot as it is on the second floor. But if the appraiser comes in and says well, that's just an entry level, that's the first floor, then the appraisal goes up.
Now I've had three different appraisals, and we're still having discussions back and forth. Now what's one person's basement is another person's first floor, and that's the inherent problem we have here.
And that's why I come back to the theme I introduced in my opening comment. If we try to streamline this process too quickly, there may be some people who are satisfied because they will get greater value for their property. But at the end of the day, the taxpayers will not have gotten full value for the property that they've been holding, or we've been holding in their trust for, in many instances, hundreds or more years.
Mr. FALEOMAVAEGA. Mr. Glass.
Mr. GLASS. I know that fairness is the goal here, and it's not an easy road to tow. But let me give you a couple of examples.
Mr. Chairman, you mentioned wetlands. Wetlands have been designated for at least a decade or two. On a regular basis Western Land Group goes out into the market and purchases wetlands. There has been a market for existing wetlands. We have been able to find fair market value wetlands all over the United States to put into the land exchanges.
In other words, the situation has stabilized after 10 or 15 years of property values being dislocated and disrupted. Where the real problems areand you're seeing it hereI have nothing but empathy for Commissioner Gardner and what he is going through with the Desert Tortoise. We do a great deal of work up in the Pacific Northwest, and as you know, Mr. Chairman, first it was the Spotted Owl and then it was the Marbled Muirlet. All of a sudden, it's various species of salmon. And each one of these new additions, new species that's considered under the Endangered Species Act has had a profound impact on the value of both the public land and the private land that's out there.
Page 58 PREV PAGE TOP OF DOC And I will also tell you that the agency, the BLM, treats these species differently in different parts of the country. And I will tell you that there are few exchanges in the Pacific Northwest where they have run into the same problem that Commissioner Gardner has run into, because they've made an administrative decision to not consider the impact of endangered species on the two sides of the transaction.
And typically, what occurs is that the private landowner who has an HCP or who has spotted owl on his land trades that spotted owl land to the United States, ignoring the fact that there may be an appraisal issue associated with it. The landowner acquires land that doesn't have owls or salmon or whatever, that has harvestable timber on it. That's an administrative decision that has been helpful, I think, to some degree in the Northwest. But it was handled, apparently with the opposite outcome with Commissioner Gardner.
Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.
Mr. HANSEN. I don't mean to pick on anybody here, but Mr. Gardner, why did you go to South Dakota to get an appraiser. We keep hearing there's problems in the office up there. Now I don't want to spit on the flag, but why did you go to South Dakota? What was wrong with the one in Utah?
Mr. GARDNER. Well, initially, in our agreement that we had in determining the prevalue estimate, it was to be appraisers outside of the State of Utah or outside of the involvement of the Utah Appraisal Office, at least. And so that
Mr. HANSEN. The BLM Appraisal Office in Utah is what you're referring to.
Mr. GARDNER. BLM Appraisal Office in Utah, yes. And the BLM is the one that selected Mr. Widdoss as a review appraiser for them to help with the land exchanges in Washington County.
Mr. HANSEN. Was there quite a difference between what you got out of the one from Utah and the one from South Dakota?
Page 59 PREV PAGE TOP OF DOC Mr. GARDNER. Well, Utah we knew we had the value of $1,000 gift and that was their appraisal they did on our property. And I might add that they tried to incorporate them again here just a few months ago, and they sent down the same appraiser even after the legislation that you put through Congress specifying that the Endangered Species was not to have an effect on property. And he appraised some adjoining land to our land and came up with the same value.
Mr. HANSEN. Maybe I'd have to ask Mr. Lamb this question. Maybe Mr. Shea wouldn't be aware of it. Do you ever use anybody outside of the Utah State Appraiser at BLM to do Utah work?
Mr. SHEA. Do we ever use outside of Utah?
Mr. HANSEN. Yes.
Mr. SHEA. Yes, we do.
Mr. HANSEN. Have you done that on a regular basis or is that an uncommon basis? I see the one example here, but are there any others?
Mr. SHEA. I'd have to ask Bill.
Mr. HANSEN. In other words, how many times have you used somebody outside of the Utah Appraisal of Mr. McDonald?
Can you step up to the mike there, Mr. Lamb, so the recorder can pick you up? And identify yourself first, if you would please.
Mr. LAMB. I'm Bill Lamb, the Acting State Director for Utah.
I guess this is a complicated question. When Mr. Gardner, Commissioner Gardner, had the first appraisal on there, and this was some time ago, your legislation provided that to all lands in Washington County the existence of endangered species would not be considered when making a valuation.
The valuation of Mr. Gardner's land happened prior to that legislation enacted. So one appraiser that went into the area appraised it at $1,000 an acre; the other appraised it somewhere around $7,000 an acre. We had a review appraiser who was outside of the State for the reason that these gentlemen have stated, that they felt that they were biased and so we went outside of Utah to find some review appraiser.
Page 60 PREV PAGE TOP OF DOC During this process, we felt that it was necessary that we go through some kind of a bargaining. So we established a small team. They looked at the situation and came up with a valuation of, I think it was, $7,440 for the property, and Mr. Gardner and his family accepted that value.
It was a long, drawn-out process because of the various things that happened during the course of the time that we were involved.
Mr. HANSEN. Thank you for your answer. Mr. Faleomavaega, do you have any more questions? I've got one final question for the Director and I'm ready to
Mr. FALEOMAVAEGA. No questions, Mr. Chairman, but only to thank our Director, Mr. Shea, of the BLM, and our friends from Utah and Mr. Glass for their fine testimony. I sincerely hope, Mr. Chairman, that we will do our part and hopefully make some constructive amendments, if necessary, to the current law to be helpful not only to Mr. Shea, but to our friends also from Utah.
Mr. HANSEN. Mr. Shea, we have a rumor up here which I hope is not true that one of the men from South Dakota and one from New Mexico was told not to come and testify, that were supposed to be here to testify, that they would have trouble with their land exchange with the BLM. Any truth in that?
Mr. SHEA. Oh, absolutely not. We met with them two weeks ago and I was the one that suggested that they come. And Mr. Powell wrote you a letter, I believe, and Mr. Johnson did, as well. And we have formed a very effective working relationship. We are having all of our State Directors here in April to meet jointly with them to see if there aren't ways we can expedite exchanges.
So I have encouraged that partnership and both of them are outstanding public servants in their respective states that we support.
Page 61 PREV PAGE TOP OF DOC Mr. HANSEN. We're not trying to create any problem for you. We just wouldn't want to have anyone told they couldn't come, especially if we asked them to.
Let me thank you, Mr. Shea, and the members of the panel. It's been very informative. I don't know what will come out of this, but I do think that there is some very necessary parts of streamlining. If not, we are probably going to go back to the old saw of just putting it in legislation. I don't think that's the right way to do things. I think it really should come through the agencies.
Thanks so much, and this hearing is now adjourned.
[Whereupon, at 11:51 a.m., the Subcommittee adjourned subject to the call of the Chair.]
[Additional material submitted for the record follows.]
STATEMENT OF PAT SHEA, DIRECTOR, BUREAU OF LAND MANAGEMENT, REALTY APPRAISAL PROCESS ON BLM LAND EXCHANGES
Thank you for the opportunity to testify on the Bureau of Land Management's (BLM) exchange and appraisal process. Since becoming BLM Director, I have come to appreciate both the importance of the exchange program and its complexity. It is vital that the interest of the taxpayersthe true landownerbe protected and that we find a means of improving and facilitating the exchange process.
We know that there is room for improvement in our land exchange process. We need to consider how the appraisal process might be revised, whether the BLM is applying consistent criteria in identifying potential land exchanges, how much discretion should be left to local BLM land managers, and what guidelines are needed when private developers and nonprofit conservation groups are involved. By strengthening its land exchange policies and procedures, the BLM can continue to acquire private property for public use while protecting the interests of American taxpayers.
Page 62 PREV PAGE TOP OF DOC I have undertaken several measures to improve this program. I have established procedures for a second level review by the BLM State Director or the Washington Headquarters Office. The second level review requires concurrence in decisions involving exchanges greater than $500,000 in value. These new procedures also require a feasibility analysis report for all land exchanges and require the concurrence for any dismissal of protests to any land exchange decisions. In addition, I am establishing a bureauwide land exchange team to assist in the review of high priority exchanges, provide additional technical support to BLM field offices, and address policy and procedural issues.
Before discussing the specifics of our program, I would like to offer some background on the exchange program.
The BLM, with stewardship of more than 264 million acres of landmore than any other Federal agencycompletes 60 to 70 land exchanges every year. On average, these exchanges total roughly 150 000 acres of land exchanged each year at a value of about $50 million.
Land exchanges are an important tool to carry out BLM's land management program. Exchanges allow the BLM to acquire the kind of land that is suited to public ownership: land, the public use of which is conservation, such as habitat for wildlife including threatened or endangered species; land that offers recreational opportunities for the public; or land containing sensitive riparian areas that are critical to the health of streams, rivers and entire watersheds. Exchanges also allow the BLM to consolidate land ownership patterns where appropriate, to increase our efficiency and reduce cost. The Department strongly supports public ownership of public lands and is committed to working with other jurisdictions to improve land ownership patterns and the management of those lands. This is consistent with the Federal Land Policy and Management Act of 1976 which provides that ''the public lands [will] be retained in Federal ownership, unless . . ., it is determined that disposal of a particular parcel will serve the national interest . . .''
Page 63 PREV PAGE TOP OF DOC Historically, land exchanges are time consuming because of the number of affected parties, user and interest group concerns, and lengthy assessment and analysis procedures. However, the Federal Land Exchange Facilitation Act of 1988 (FLEFA) and joint BLM and Forest Service land exchange regulations published in 1993 have provided tools that can improve the land exchange process. Parties involved in the exchange must reach agreement on a wide variety of issues including scheduling, sharing of costs, selection of appraisers, number of appraisal reports, and methods for resolving disputes concerning the appraised value. Like other complicated real estate transactions, there can be periodic delays and disagreements between the parties.
Examples of recent successful exchanges include the following:
California: BLM completed an important exchange last year with the Merced Irrigation District in California to consolidate some lands along the Merced Wild and Scenic River. The Irrigation District acquired title to 180 acres of inaccessible public lands which were key parcels in its water operations to serve its customers, while BLM acquired 160 acres of land with river frontage that provides the public better access to this nationally rated Wild and Scenic River, known for its whitewater thrills. It was a win-win for the public on both sides. The BLM and the Irrigation District both received fair market value for their constituents.
The positive benefits of such small, but locally important exchanges cannot be overstated, but these benefits can also be accomplished on a larger scale for even greater returns. Also, in California, the BLM and the State Land Commission have already exchanged 70,000 acres within the California Desert with plans underway for another 200,000 acres to be exchanged over the next few years. These exchanges will result in BLM acquiring State inholdings in the National Park Service managed Mojave preserve and in Wilderness Areas managed by BLM for excess Federal lands with development potential in other parts of the State. Appraisals were done cooperatively by BLM and the State Land Commission to ensure that both public entities received fair market value for these public assets.
Page 64 PREV PAGE TOP OF DOC Colorado: Last summer, the BLM's Canon City District acquired through an exchange the 1,272-acre VVN Ranch in Park County, Colorado. The BLM did so with the help of the Rocky Mountain Elk Foundation, which purchased the property and held it until the land exchange could be completed. The ranch contains a year-round elk habitat; significant scenic, recreation, and wildlife resources; and three miles of wetland-riparian (streamside) areas that were not previously available for public use. In return, 840 acres of land within 13 scattered parcels were transferred into private ownership. The majority of these lands were grazed lands with some potential for recreation home sites.
Utah: In January, the Dixie Field Office completed an innovative, three-way exchange that added critical desert tortoise habitat to the Red Cliffs Desert Reserve located in Utah's Washington County. In the trade, the Federal Government acquired 614 acres of desert tortoise habitat from the State's School Trust Administration in exchange for a 250 acre gravel pit. Through the exchange, the BLM transferred the gravel pit to Western Rock Products, which in turn provided $1,950,000 for the habitat lands that the State transferred to the Federal Government. Creativity and flexibility, along with cooperation between public and private partners were the keys to success in this win-win transaction. This is but one example of four recently completed exchanges in southern Utah that has added nearly 1,200 acres of habitat to the Red Cliffs Reserve in return for lands and resources that can be privately developed in booming Washington County.
The vast majority of land exchanges are like these examplesso clearly logical and mutually beneficial that they are completed without protest or controversy. Sometimes, however, proposed land exchanges do become contentious. Appraisals can be subject to question and criticism from those involved in the proposed exchange or from outside parties. Appraisals are especially difficult and controversial in areas of rapid growth and volatile market prices. This makes the job of appraisers even more challenging. Land exchanges are voluntary transactions. They require mutual agreement by parties to the transaction on a wide variety of issues including value. To be successful, parties to the transaction must have confidence in the appraisal process.
Page 65 PREV PAGE TOP OF DOC
I would like to describe briefly how real estate appraisals are incorporated into the land exchange process. The appraisal process is essential in reaching agreement on the value of the lands involved in the exchange. Again, it is important that the parties have confidence in the integrity and impartiality of those involved in the process.
Real estate appraisals are obtained to ''estimate'' the market value of lands involved in a proposed land exchange. Ideally the appraisal report is an objective, impartial estimate of what the property would sell for on the open market as of the date of the appraisal report. The credibility of the appraiser's report is affected by his or her ability to obtain reliable market information, properly analyze the information, develop and test various assumptions, and reach a logical and supported estimate of value. The appraisal report is an opinion of value; an appraiser's estimate of what the property would likely sell for. The appraiser does not determine value, but instead estimates market value.
Appraisal reports are prepared in accordance with BLM appraisal standards in 43 CFR 2200 and, to the extent appropriate, with the Department of Justice ''Uniform Appraisal Standards for Federal Land Acquisitions.'' These standards are consistent with the ''Uniform Standards of Professional Appraisal Practice'' published by the Appraisal Foundation, Appraisal Standards Board.
We review appraisal reports to assure they meet professional and BLM appraisal documentation standards. The reviewer prepares a report approving the appraisal and recommending its use for purposes of reaching an agreement.
If parties to a proposed exchange cannot reach agreement on the approved appraised values, bargaining or another method may be used to reach agreement. If chances for agreement are remote, BLM or the property owner may decide to end further efforts.
Page 66 PREV PAGE TOP OF DOC We define bargaining as a process, other than arbitration, by which parties attempt to resolve a dispute concerning the appraised value. Different forms of mediation or dispute resolution techniques may be used to resolve the disagreement. The process is premised on the theory that reasonable people can reasonably disagree with the appraiser's analysis. Therefore, bargaining is limited to the information, assumptions, and conclusions in the appraisal reports.
Any agreement reached by the parties must be in writing and made part of the land exchanges' administrative record. Any appraisals presented during the bargaining process must be open to review by a qualified appraiser representing the agency with responsibility for appraisal review. The BLM State Director must concur in any agreement reached through bargaining.
Once parties have agreed, BLM publishes a Notice of Decision (NOD) regarding the proposed land exchange transaction. The NOD informs the public of the BLM decision to proceed with the land exchange. The public has 45 days to comment or protest BLM's decision. During the 45 day period, the appraisal reports, along with other supporting documentation, is available for review by the public.
I hope the information I have shared today has clarified the process and demonstrated my commitment to achieving a better program. Protecting the natural resources, protecting the public assets, and achieving a fair market return on all land transactions are my primary goals.
This concludes my statement. I will be glad to answer any questions you may have.
Page 67 PREV PAGE TOP OF DOCSTATEMENT OF JOHN A. HARJA, VICE-CHAIR, BOARD OF TRUSTEES, UTAH SCHOOL & INSTITUTIONAL TRUST LANDS ADMINISTRATION
My name is John A. Harja, and I represent the Utah School and Institutional Trust Lands Administration (the ''Trust Lands Administration''), an independent state agency that manages more than 3.7 million acres of land within Utah dedicated to the financial support of public education. I serve as Vice-Chair of the Board of Trustees that guides and supervises the Trust Lands Administration's activities.
Thank you, Mr. Chairman, and members of the Committee, for the opportunity to testify today concerning Bureau of Land Management (''BLM'') land exchanges. It is no secret that BLM land exchanges in Utah in the last several years have been both controversial and difficult for all participants. From the standpoint of the Trust Lands Administration, the BLM has recently made substantial progress in some areas, and there is reason for optimism that future exchanges, whether administrative or legislative, need not be so difficult. Our testimony today is meant to:
Encourage the BLM to continue some positive activities with respect to administrative exchanges;
Suggest a few changes in the BLM's statutory and regulatory procedures for administrative exchanges; and
Inform the Committee of some situations where Congressional involvement may clearly be in the public interest.
Many members of the Committee are familiar with the situation of Utah's school trust lands. Of the 3.7 million acres managed by the Trust Lands Administration, over a million acres are located inside national parks and forests, proposed wilderness, critical habitat for endangered species, and of course the new Grand Staircase-Escalante National Monument. Although the lands were granted to Utah with the express purpose of generating revenue for Utah's schools and other public institutions, Federal land management restrictions have in many cases made economlc use of the state's trust lands impossible.
Page 68 PREV PAGE TOP OF DOC The natural solution to the problem of state trust inholdings within Federal reservations is to exchange the state lands for more developable, less sensitive Federal lands elsewhere in Utah. Unfortunately, this solution has been difficult to implement except in a few limited circumstances, with the result that state inholdings continue to exist within most Federal reservations in Utah. This is not a desirable situation for anyone. Federal managers have to contend with potential development of state enclaves within otherwise undisturbed Federal lands, while the State faces substantial controversy when its legal duty to maximize revenue for the schools conflicts with the purposes for which the particular park or other reserve was created.
1. Recent History of BLM-State Administrative Exchanges in Utah.
As the Committee is aware, the BLM has an existing process for administrative exchanges under the Federal Lands Policy & Management Act (''FLPMA'') and the Federal Lands Exchange Facilitation Act (''FLEFA''). The Trust Lands Administration believes that this process can work in some circumstances, although, as we will discuss later, its utility in large scale exchanges is doubtful. Our experience with administrative exchanges has been difficult in recent years, but we have also seen great improvement within the last year with respect to the BLM's commitment of good personnel and adequate resources dedicated to making these exchanges work. We commend the BLM for these commitments, and are optimistic that this positive trend will continue.
The best example of the BLM administrative exchange process in Utah in recent years has been that involving the Desert Tortoise Habitat Conservation Plan area near St. George. When the U.S. Fish and Wildlife Service designated thousands of acres within and just outside the city limits of St. Georgeone of Utah's fastest growing citiesas critical habitat for the threatened tortoise in 1991, it effectively shut down development of almost ten thousand acres of prime residential and commercial land owned by the State, in addition to thousands of acres of private lands.
Page 69 PREV PAGE TOP OF DOC In 1994, the BLM and the Trust Lands Administration signed a Memorandum of Understanding creating an assembled land exchange process to facilitate exchange of state desert tortoise lands and other state lands desired by BLM for BLM lands elsewhere in the State. Although the MOU was ostensibly meant to speed BLM-State exchanges along, and although the tortoise exchange was ostensibly a BLM priority, no exchanges were completed for several years after the MOU was signed.
What were the problems that delayed desert tortoise exchanges for so long?
Appraisals conducted by the BLM's State Office penalized landowners for the misfortune of owning valuable habitat. BLM's state level in-house appraisers told landowners that the Fish and Wildlife Service, another Department of Interior (''DOI'') agency, would never let them develop their land because of the critical habitat designation. Therefore, the land was deemed virtually worthless by BLM. Not surprisingly, landowners offered 10 cents on the dollar for their lands were not willing participants in the exchange program, and no exchanges were completed until after Congress resolved this issue in 1996.
Certain state level BLM appraisal staff appear to have engaged in a campaign of intimidation of appraisers who differed on how to appraise tortoise lands. Acting as a private individual, at least one BLM appraiser filed complaintsultimately dismissed as meritlesswith state appraisal licensing authorities claiming violations of state appraisal standards, and seeking disciplinary action against a private appraiser. The private appraiser's work was then rejected by BLM because of the disciplinary filing. These actions were hardly conducive to efforts to reach mutually acceptable valuations.
There has been no clarity as to how legitimate differences between the parties over valuation can be resolved. Even the best appraisers often differ wildly in their opinion of the value of particular tracts. Where this occurs, fair, arms-length negotiation is the only solution that will reach a mutually acceptable result. Yet many parties have felt that the BLM has at times used its regulations and appraisal guidelines as justification for refusing to negotiate, resulting in a ''take it or leave it'' situation. Again, landowners, whether private or state, who feel that there is no room for bargaining over legitimate differences in valuation are unlikely to be willing participants in the exchange process.
Page 70 PREV PAGE TOP OF DOC BLM District offices elsewhere in Utah have been unable for staffing and budgetary reasons to perform work necessary to amend Resource Management Plans, perform NEPA analysis, and conduct cultural resources reviews for land targeted by the State for acquisition. At least one 12,000 acre tract sought by the State has been placed ''off limits'' for exchange indefinitely, not because of public interest or environmental reasons, but rather because of lack of BLM resources. The larger the exchange, the more profound this problem becomes; past experience would suggest that any administrative exchange of 100,000 acres or more would take decades to complete if it could be done at all.
Happily, the BLM has made substantial progress during the last year in correcting some of these problems. Their efforts have resulted in the completion of an exchange of several hundred acres of state tortoise habitat for BLM lands near Park City, Utah; an innovative three way exchange of an additional 614 acres of state tortoise habitat that involved the Trust Lands Administration, the BLM and a private party; and the anticipated completion in the next few months of a multi-tract exchange that will protect habitat for the endangered dwarf bearclaw poppy. BLM employees have worked hard to complete these projects, and the Trust Lands Administration appreciates their efforts. We are optimistic that ongoing administrative exchanges with BLM will continue on this successful path over the next year.
What has made the difference between recent successes and past failures?
The BLM has made a strong commitment to bring in experienced out-of-state BLM personnel to expedite in-process exchanges. This has soothed some of the disputes that arose early in the process over appraisal methodology, and has increased the State's confidence in the process. Although we recognize that some private parties have criticized the involvement of Washington-level BLM appraisers in local exchanges, the Trust Lands Administration has welcomed the specific attention and problem-solving focus that the BLM has exhibited in this regard.
Page 71 PREV PAGE TOP OF DOC The BLM has been willing to engage in a more open dialogue concerning reasonable differences in valuation.
The BLM State Office has committed more staff to moving BLM-State exchanges forward, and has worked to identify problem areas in advance, so that resources can either be devoted to solving the problem in a timely manner or diverted to more productive uses.
In the case of the desert tortoise, Congress resolved the major valuation issue: the impact of Endangered Species Act (''ESA'') on land values. As noted above, DOI had previously taken the view that the ESA drastically limited landowners' development options, making previously valuable development land virtually worthless. Not surprisingly, landowners felt that they should not be penalized for protecting endangered species. In Public Law 104-333, Congress directed the Secretary of Interior to value lands in Washington County, Utah without regard to the presence of endangered species or the designation of critical habitat. This legislation was the crucial factor in achieving landowner willingness to exchange; no private tortoise exchanges were completed in the years before the legislation, while a number have been completed in the 16 months since Public Law 104-333 was enacted.
Again, the Trust Lands Administration is pleased at the progress of recent months, and will look forward to the continuation of that progress as the exchange process continues.
2. Suggestions for Improving the Exchange Process.
There are certain steps that could expedite state-BLM exchanges throughout the west. The Committee should consider the following concepts:
a. Expand the concept implemented in Public Law 104-333 that Federal environmental limitations (in that case threatened and endangered species) not be used to devalue the property to be acquired, where the purpose of the Federal acquisition is to protect that specific environmental value.
Page 72 PREV PAGE TOP OF DOCb. Where state law or agreement provides protections for cultural and historic resources analogous to those provided by the National Historic Preservation Act (''NHPA''), do not require NHPA surveys prior to transfer of lands to states by BLM.
c. Increase the current $150,000 threshold for expedited exchanges without formal appraisals.
In addition to these points, the Trust Lands Administration would encourage meaningful Federal-state dialogue concerning valuation issues, notwithstanding the current legal dispute in Utah concerning the valuation of natural lands. As the Committee is aware, there has been controversy in recent months concerning whether past BLM exchange appraisals have adequately recognized the great increase in land values in rapidly urbanizing areas such as Las Vegas. The Trust Lands Administration would point out that there has been an equally stunning rise in land prices in rural areas of the West recognized as having natural values such as gorgeous scenery, proximity to wilderness, ancient Anasazi ruins, and recreational opportunities. Simply put, there are tens of thousands of people today who want to own a part of those natural values, and who have the money to pay handsomely to do so. Too often, when state natural lands are being acquired by BLM, the focus of Federal appraisers on prices paid in the past for traditional uses neglects this fact of the New West.
Just as the BLM is rightly concerned about not receiving full value for its urban lands state land management agencies (with their fiduciary duty to achieve full value for their beneficiary institutions) cannot disregard prices paid in the market for lands having outstanding natural characteristics. When the Federal Government seeks to acquire these lands for public purposes, there must be a mechanism for addressing this issue.
3. The Need for Congressional Involvement in Some Circumstances.
As BLM Director Shea has discussed in recent newspaper commentaries, the BLM's land exchange program serves the important Federal goal of consolidating Federal ownership of lands with specific values: wildlife and endangered species habitat, land that offers important recreational opportunities for the public, and ecologically sensitive lands such as riparian areas. This is a worthy goal. The checkerboard pattern of state and Federal land ownership now existing throughout much of the west is unworkable in light of the differing management mandates of the various landowners, and often leads to unnecessary conflicts between the Federal Government and the states. The suggestions for legislative and regulatory changes described above would go far to further the BLM's objectives and reduce state-Federal disputes.
Page 73 PREV PAGE TOP OF DOC At the same time, there are inherent limitations to the BLM's administrative exchange process. Where such limitations exist, Congressional involvement may serve the public interest by facilitating desirable exchanges and eliminating unnecessary obstacles. A small but telling example is the language in Public Law 104-333, discussed above, requiring that exchange valuations in Washington County not penalize landowners by devaluing land on account of its status as critical endangered species habitat. Before this statute was enacted, desert tortoise habitat acquisition was at a virtual standstill; afterwards, the program has moved forward with increasing success.
A second example of a situation where administrative exchanges fail and Congressional involvement may be useful occurs in the case of multi-tract exchanges involving large areas. There are well over a thousand tracts of state trust lands scattered within proposed BLM wilderness in Utah, while the Grand Staircase-Escalante National Monument contains 337 school trust parcels encompassing over 175,000 acres. The existing administrative process would typically require appraisals of each such parcel, together with appraisals, RMP amendments, NEPA review, and cultural resources surveys of all BLM tracts to be acquired. When lower value rural lands are the subject of the exchange, transactional costs can swallow any exchange benefits. More importantly, BLM often cannot devote the resources to complete the necessary work while performing its other responsibilities as well.
In the early 1980s, former Utah Governor Scott Matheson recognized the untenable nature of the checkerboard pattern of state land ownership in Utah, and launched an effortProject BOLDto consolidate the thousands of scattered state sections into several dozen large consolidated state land blocks. Significantly, both the BLM and the State then recognized that this effort was too large to be completed administratively, for the same reasons we have discussed today, and turned to Congress for implementing legislation.
Although Project BOLD ultimately was not finalized, its lessons are still useful. There are inherent limitations in the use of appraisals in exchanges involving hundreds of tracts, both in terms of accuracy and transaction costs. Current statutory limitations on the BLM with respect to land use planning, NEPA compliance, and cultural resources surveys, when combined with limited agency resources, can make large administrative exchanges impractical. Conversely, consensus between the parties to the exchange and affected third parties on specific lands to be exchanged, with Congressional implementation of that consensus, can achieve exchanges having great environmental and public benefits where the administrative process cannot.
Page 74 PREV PAGE TOP OF DOC Congress has followed this path in recent years with the 1996 Arkansas-Oklahoma land exchange. Similarly, although in a slightly different format, the state land exchange provisions contained in recent California desert protection legislation are also of note. Although legislation of these types will not always be necessary with large exchanges, it is clearly merited where resource limitations, special environmental or valuation concerns, or other factors jeopardize the success of the administrative exchange process.
In conclusion, the Trust Lands Administration believes that recent efforts by the BLM to expedite administrative exchanges in Utah are bearing fruit. We encourage BLM to continue these efforts, and to consider additional steps to expedite state-Federal exchanges. At the same time, the Trust Lands Administration urges the Committee and your colleagues in Congress as a whole to consider legislation implementing or expediting high priority state-Federal exchanges.
Thank you for the opportunity to testify before the Committee.
STATEMENT OF THOMAS R. H. GLASS, WESTERN LAND GROUP, INC.
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to testify today. My name is Tom Glass, and I am a principal in Western Land Group, Inc., a national public lands consulting firm headquartered in Denver.
Western Land Group. Inc.
Since our formation in 1981, Western Land Group has assisted in the consummation of more than 100 Federal exchanges, utilizing both legislative and administrative processes. We continue to help clients to facilitate dozens of new cases, involving lands ranging from tens of thousands of acres to less than one acre.
Page 75 PREV PAGE TOP OF DOC Benefits of Land Exchanges
Working in partnership with BLM and other public land management agencies throughout the West, Western Land Group achieved fundamental public and private land objectives. These include, but are certainly not limited to:
protecting municipal watersheds;
placing key threatened wetlands and wildlife habitat in the public domain;
eliminating private inholdings in designated wilderness areas;
helping municipalities and counties acquire lands for administrative purposes and open space;
facilitating responsible community growth; and
improving hunting, fishing, and recreational access to Federal land.
Western Land Group helps agencies to accomplish their goals, despite limited agency staff and resources. Together, we have created more coherent and logical ownership patterns, resulting in win-win situations for both the public and private sectors.
Adequacy of Current Land Exchange Law, Regulation, and Policy
Until recently, current law, regulation, and policy governing land exchanges has worked fairly well. The Federal Land Exchange Facilitation Act (FLEFA), which Western Land Group helped develop, has streamlined the process somewhat. The Final BLM Land Exchange Manual integrates the essence of FLEFA, and is another good tool which all BLM lands staff should review carefully.
Page 76 PREV PAGE TOP OF DOC Western Land Group is, however, concerned about several recent developments in BLM's land exchange policies.
1. Western Land Group is concerned about the newly instituted directive which relinquishes a BLM State Director's authority to approve exchanges where the value of public lands to be exchanged is more than $500,000. The directive requires that Washington, DC staff approve exchanges based upon an additional level of feasibility analyses and issues papers.
In most states, BLM has talented field staff who should be supported, not reprimanded. FLEFA encourages the consideration of local issues and local politics in all exchanges. Grassroots involvement, including the dissemination of accurate, ethical information early-on, is critical to creating successful exchanges. In general, local personnel (including State directors) are better acquainted with local concerns than are Washington, DC personnel whose expertise may lie elsewhere. The emphasis should be on increasing the capacity and sophistication of BLM's lands staff at the state and local levels, not on developing a National Exchange Team.
BLM's new directive could slow down the process considerably. By transferring approval authority to Washington, the directive requires that an additional level of feasibility analyses and issue papers be completed for the Washington staff at three stages of the exchange process. Western Land Group maintains that the previous level of analysis, when combined with community involvement, is adequate for most exchanges, and is largely redundant. The biggest problem with the added level of analysis is that Washington, DC staff has no mandated response time. The lack of guaranteed response times would most certainly cause delay. The most serious consequence of delay is a reduced ability for the United States to acquire premium private lands. Exchange proponents must purchase private lands, usually within strict timeframes. If required feasibility analyses and issue papers are sent to Washington without specific guaranteed response times, it will be impossible for exchange proponents to set closing dates. Without closing dates, private landowners interested in conveying lands to the United States cannot enter into secure purchase contracts with the United States. Additional steps in the process could also lead to expiration of appraisals, which are valid for a maximum of one year.
Page 77 PREV PAGE TOP OF DOC1. Western Land Group is also concerned about the increased popularity of Competitive Exchanges, or BLM's intent to auction unwanted Federal lands to the highest bidder.
As a steward of the land, BLM has a responsibility to get the best deal for the public when disposing of land. The best deal means more than just the most money. Exchanges should be driven not only by BLM priorities, but also by community priorities including development planning, infrastructure needs, open space needs, access needs, and the like. To auction a parcel could result in an outsider, who has no interest in a community's needs, acquiring the parcel simply because he or she was willing to pay the most.
The Crystal River Ranch land exchange, which Western Land Group closed in 1995, is an example of why competitive exchanges should be approached with caution. The Crystal River Ranch exchange involved the acquisition of 1,439 acres of Federal lands located in the Roaring Fork Valley near Aspen, Colorado (a hot real estate market). The Federal lands were situated within the ranch, accessible by public road, and managed by BLM. Following the exchange, Crystal River Ranch donated a conservation easement on the acquired lands to the Colorado State Division of Wildlife. The conservation easement provides for public hunting on the acquired lands, as well as the protection of wildlife habitat values and continued ranching activities in perpetuity. If the public lands in this exchange had been auctioned to the highest bidder, such as a real estate speculator, the unique negotiated benefits of the transaction would never have occurred. Instead, the United States received full fair market value for the property and protection of open space and wildlife values in perpetuity.
As an alternative to competitive exchanges, Western Land Group recommends the following approach, once Federal lands have been clearly identified for disposal. First, work with the community to identify acquisition priorities and generate creative options. Second, identify and obtain high priority offered lands with significant public value. Third, work with proponents who have a vested interest in the lands. Fourth, work with exchange facilitators who share the agency's goals. Fifth, complete exchanges based on appraisal rather than speculation. The appraisal process has many checks to ensure fair market value.
Page 78 PREV PAGE TOP OF DOCWith regards to the appraisal process, Western Land Group has been pleased with FLEFA's arbitration provision. We believe it has been a helpful tool to resolving disputes involving value. In addition, Western Land Group commends Dave Cavanaugh, BLM's Chief Appraiser here in the District of Columbia, for his recent efforts on the City of St. George land exchange in Washington County, Utah. Mr. Cavanaugh stepped in at the right time to resolve a difficult situation involving appraisals. Serving as the review appraiser, Mr. Cavanaugh was able to insure that the local private appraiser adequately appraised the involved BLM lands while giving the City of St. George proper credit for its lands within the Mojave Desert Tortoise Preserve. His involvement is a perfect example of how knowledgeable headquarters staff can be effective in trouble-shooting and overseeing difficult exchanges.
We also suggest that the amount allowable under Sec. 206(h) (1) (A) of FLPMA be increased from $150,000 to $500,000 to allow utilization of statements of approximate equal value rather than full appraisals in appropriate situtations. This would help reduce the backlog of appraisals and appraisal reviews.
On balance, Western Land Group believes that BLM's exchange program has worked fairly well. We do have two more recommendations, however, for the Subcommittee to consider. The first relates to cash equalization moneys.
Cash Equalization Moneys
The Federal Land Policy and Management Act requires that land be exchanged for exact equal value. Otherwise, cash equalization payments must be made. FLEFA permits certain waivers of this requirement. The biggest remaining problem, however, is that BLM in particular sometimes does not have money on hand to make equalization payments. As a result, exchanges sometimes have to be delayed to await Congressional cash equalization appropriations. In our opinion, Congress does not need to micro-manage cash equalization moneys in this matter.
Page 79 PREV PAGE TOP OF DOC We recommend that Section 203 of FLPMA be amended so a portion of the moneys received by the Secretary of the Interior from the sale of public lands be placed in a special fund. This fund would be earmarked and available to the Secretary, without need of appropriation, to provide moneys for cash equalization in land exchanges. The Forest Service already has a similar fund under the Sisk Act, and it has served them well. In that regard, we recommend that the current requirement for appropriation of all cash equalization dollars be eliminated and that the BLM be authorized to manage a fund similar to the Forest Service's. Spending from this fund could be limited to cash equalization purposes or other purposes, as Congress deems appropriate.
Land and Water Conservation Fund
As a final thought, Mr. Chairman, while Western Land Group is obviously a great supporter of well-crafted and well-managed exchanges, Western Land Group recognizes that exchanges are not a panacea. Land exchanges cannot substitute for Federal purchases using the Land and Water Conservation Fund. We recommend that Congress fully fund the LWCF, as was done in 1998, in order to reduce the estimated $2$3 billion backlog of land that willing sellers would like to sell Uncle Sam for various reasons.
Mr. Chairman, that concludes my testimony. I would be happy to answer any questions that you may have. Thank you again for your sponsorship of FLEFA and your ongoing interest in land exchanges as evidenced by your holding this hearing today. It is very encouraging to us, as a small business, to have policymakers such as yourselves striving to improve the land exchange process.
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