Forest Service: Land Acquisitions Within the Lake Tahoe Basin (Letter
Report, 10/31/94, GAO/RCED-95-22).
The Santini-Burton Act, enacted in 1980, authorized the sale of about
7,000 acres of federal lands within Clark County, Nevada, to allow more
orderly development of the communities there. The federal lands were
owned by the Bureau of Land Management. The act also required the bulk
of the proceeds from the land sales to be used for a buyout program in
which the government would purchase environmentally sensitive private
lands around Lake Tahoe in an effort to stem further degradation of the
lake. Concerns have been raised about whether property owners in the
Lake Tahoe Basin have been treated fairly when the lands were acquired
under the act. This report determines the extent to which (1) the
Forest Service acquired lands within the basin under the act's buyout
program, (2) the classification of lands within the basin as
environmentally sensitive may have harmed their value, and (3) the
Forest Service's acquisition of environmentally sensitive land in the
basin may have involved the federal government taking private property
under the Fifth Amendment to the U.S. Constitution.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-95-22
TITLE: Forest Service: Land Acquisitions Within the Lake Tahoe
Basin
DATE: 10/31/94
SUBJECT: Environmental policies
Community development
Forest conservation
Land use law
Land management
Real property acquisition
Fair market value
Constitutional rights
Regional planning
IDENTIFIER: Clark County (NV)
Lake Tahoe Basin (CA/NV)
Individual Parcel Evaluation System
Bailey Land Classification System
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Cover
================================================================ COVER
Report to the Honorable
Harry Reid, U.S. Senate
October 1994
FOREST SERVICE - LAND ACQUISITIONS
WITHIN THE LAKE TAHOE BASIN
GAO/RCED-95-22
Forest Service
Abbreviations
=============================================================== ABBREV
GAO - General Accounting Office
IPES - Individual Parcel Evaluation System
TRPA - Tahoe Regional Planning Agency
Letter
=============================================================== LETTER
B-258253
October 31, 1994
The Honorable Harry Reid
United States Senate
Dear Senator Reid:
Public Law 96-586, commonly called the Santini-Burton Act, was
enacted on December 23, 1980, and authorized the sale of about 7,000
acres of federal lands located near private lands in urban areas
within Clark County, Nevada, to permit more orderly development of
the communities in the county. The federal lands were owned by the
U.S. Department of the Interior's Bureau of Land Management. The
act also required the bulk of the proceeds from the Bureau's land
sales to be used for a buyout program through which the U.S.
Department of Agriculture's Forest Service would purchase
environmentally sensitive private lands in the Lake Tahoe Basin in an
effort to stem further degradation of the lake.\1
This report responds to your concerns about whether property owners
in the Lake Tahoe Basin, especially those who acquired lands before
December 1969--the date when the states of California and Nevada
formally began to implement cooperative land-use controls to regulate
development in the basin--are being treated fairly when their
environmentally sensitive lands are acquired by the Forest Service
under the Santini-Burton Act. More specifically, you asked us to
determine the extent to which (1) the Forest Service acquired lands
within the basin under the buyout program authorized by the act, (2)
the classification of lands within the basin as environmentally
sensitive may have adversely affected their value, and (3) the Forest
Service's acquisition of environmentally sensitive lands in the basin
may have involved a taking by the federal government of private
property under the Fifth Amendment to the U.S. Constitution.
According to the Fifth Amendment, private property shall not be taken
for public use without just compensation. Under the Fourteenth
Amendment to the U.S. Constitution, this prohibition applies to
state governments. In 1922, the Supreme Court recognized that a
regulatory action--such as implementing land-use controls--may also
constitute a taking that requires just compensation.\2
--------------------
\1 Environmentally sensitive lands are lands sensitive to human
occupancy and use on which development is creating, or would be
expected to create, unacceptable environmental disturbance to water
quality, soil, vegetation, wildlife, or cultural resources.
Environmentally sensitive lands include stream environment zones,
which are lands generally located within the 100-year floodplain or
areas of riparian vegetation, and high-hazard lands, which are
characterized by steep slopes and a fragile environmental balance or
by high erosion potential.
\2 Pennsylvania Coal Company v. Mahon, 260 U.S. 393.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
The Forest Service, the major landowner in the Lake Tahoe Basin,
acquired 3,378 land parcels in the basin totaling almost 11,000 acres
from 1982 through February 10, 1994, under the Santini-Burton Act.
About 900 additional parcels, totaling about 9,000 acres, are planned
for acquisition. Forest Service officials estimate that through July
1994 about $86.5 million (including about $7 million in grants from
the state of California) had been spent to acquire lands in the
basin.
The Tahoe Regional Planning Agency (TRPA)\3 regulates land use and
the rate of development in the Lake Tahoe Basin. TRPA has assigned
scores to land parcels throughout the basin on the basis of the
extent to which development of the parcels would affect the
environment in the basin. Parcels with low scores were considered
environmentally sensitive, and their owners were prevented from
immediately developing them. As a consequence, the ultimate sales
price paid for some land parcels by the Forest Service was probably
less than it would have been if there had been no restrictions on
their development.
While TRPA's restrictions on development likely resulted in a
reduction of the fair market value\4 of some parcels, we cannot
quantify this reduction because other variables, including local
building requirements and generally unfavorable economic conditions
in the basin area, likely also contributed to the lower prices the
Forest Service paid for some properties. However, real estate
brokers and appraisers in the basin said that the potential of a
parcel for development--as determined by its environmental
sensitivity classification--was a major determinant of its fair
market value.
In 1993, the Supreme Court of Nevada addressed the issue of whether
TRPA's regulations result in the taking of private property without
just compensation. The court held that TRPA's land-use regulations,
which in some cases have caused reduced land values, did not result
in the temporary taking of private property under either the Fifth or
Fourteenth Amendments.\5 However, owners of property in the basin
continue to assert that TRPA's regulations resulted in the
devaluation of their properties and, in effect, constitute takings of
their properties. Two cases that assert such takings are currently
before the Federal Court of Appeals for the Ninth Circuit.
We do not believe that the 135 randomly selected Forest Service
acquisitions that we reviewed involved takings by the federal
government of private property without just compensation. The Forest
Service acquired the land parcels at their fair market value as
determined by independent appraisers, only from willing sellers--thus
precluding involuntary takings of the properties. We estimate that
about 76 percent of the time, the Forest Service paid the sellers
more than the price they had paid to purchase the properties. (When
we accounted for inflation-adjusted dollars, 36 percent of the
sellers received more than they had spent to purchase the
properties.)
--------------------
\3 TRPA is a separate legal entity created under the Tahoe Regional
Planning Compact, which was adopted by the states of California and
Nevada and ratified by the Congress (P.L. 91-148, Dec. 18, 1969).
An amended compact was approved by P.L. 96-551, Dec. 19, 1980. The
agency was to establish environmental quality standards called
thresholds and adopt and enforce a regional plan and implement
ordinances that would achieve and maintain the thresholds, as well as
provide opportunities for orderly growth and development.
\4 The Uniform Appraisal Standards for Federal Land Acquisitions
(Uniform Appraisal Standards), as revised in 1992, define "fair
market value" as the amount in cash, or on terms reasonably
equivalent to cash, for which in all probability the property would
be sold by a knowledgeable owner willing but not obligated to sell to
a knowledgeable purchaser who desired but was not obligated to buy.
\5 The regulations were imposed by TRPA, which is not a federal
agency. Consequently, if there were a taking of private property, it
could not be considered a federal taking in violation of the Fifth
Amendment.
BACKGROUND
------------------------------------------------------------ Letter :2
Lake Tahoe is the largest alpine lake in the Western Hemisphere,
covering about 207,000 acres, and is known for its exceptional purity
and clarity. It lies in the Sierra Nevada Mountains of California
and Nevada. The lake, which lies two-thirds in California and
one-third in Nevada (see fig. 1), has been called a national
treasure. Governing bodies within the basin include the 2 states, 5
counties, and 20 local jurisdictions. The beauty of the Tahoe basin
has attracted large numbers of visitors interested in recreating at
the lake and people wanting to establish permanent year-round or
vacation homes along its shores.
(See figure in printed edition.)Figure 1: Map of the Lake Tahoe
Basin
Many reports and research projects have documented the degradation of
the Tahoe basin's air, water, soil, and scenic characteristics--all
of which were attributed to the rapid development occurring in the
basin. With this knowledge came the recognition that something would
have to be done to curb future development of the basin, particularly
in its most environmentally sensitive areas.
Working together to address the problems associated with the growth
and activity in the basin, the legislatures in California and Nevada
agreed on a Tahoe Regional Planning Compact, which was eventually
ratified by the Congress in 1969. This compact, as amended by Public
Law 96-551, dated December 19, 1980, stated, among other things, the
following:
The waters of Lake Tahoe and other resources of the region were
threatened with deterioration or degeneration, which was endangering
the natural beauty and the economic productivity of the region.
The Lake Tahoe region had unique, irreplaceable environmental and
ecological resources.
There was a public interest in protecting, preserving, and enhancing
these resources for the residents of and visitors to the region.
To preserve the scenic beauty and outdoor recreational opportunities
of the region, there was a need to ensure an equilibrium between the
region's natural endowment and its man-made environment.
To carry out the provisions of the compact, TRPA was established in
1969. In an effort to, among other things, protect the basin's water
and air quality, fish and wildlife, vegetation, and scenic resources
and provide for high-quality recreation, TRPA regulates land use, the
rate of growth, the extent to which land is covered with homes and
other construction, excavation, and impacts on scenic views.
After much deliberation that occurred over several years, the
Regional Plan for the Lake Tahoe Basin, which governs the long-term
development of the basin, was approved in 1987 by California and
Nevada and a 15-member Governing Board that oversees the
administration of TRPA. TRPA's regional plan and Code of Ordinances
help achieve and maintain the environmental thresholds against which
all projects and activities, including those on national forest land,
are measured.\6
In 1987, TRPA approved the Individual Parcel Evaluation System (IPES)
as the standard to be used in determining the environmental
sensitivity of vacant land parcels zoned for single-family
residential buildings. Before the initiation of IPES, vacant lands
in the basin were evaluated under the Bailey Land Classification
System, which classifies soils into seven capability classes with
varying degrees of tolerance to land development. However, because
the Bailey System did not evaluate individual parcels, it proved to
be unsatisfactory for residential parcel owners wanting to build
single-family residences and resulted in several lawsuits. As part
of the consensus-building process of developing a regional plan, TRPA
approved the use of IPES for determining the environmental
sensitivity of such parcels.
Once IPES was adopted, site evaluation teams initially visited over
10,000 vacant parcels in the Tahoe basin to assign them scores. (See
app. I for the distribution and the percentage of the IPES scores of
the original 10,000-plus parcels surveyed by TRPA.) A major goal of
the IPES scoring process is to enable TRPA to be in a position to
direct new construction to the areas that are most suitable for
development from an environmental standpoint. IPES determines, among
other things, which lots may be built upon, what percentage of each
lot may be developed, and when the lots may be eligible for
development. Among the environmental factors considered in assigning
an IPES score to a parcel are its (1) potential for soil erodibility
and runoff, (2) location with respect to a stream environment zone,
(3) ability to revegetate, and (4) proximity to the lake.
--------------------
\6 Environmental thresholds are standards necessary to maintain the
significant scenic, recreational, educational, scientific, or natural
resources of a region or to maintain public health and safety within
a region. Such standards include, but are not limited to, standards
for air quality, water quality, soil conservation, vegetation
preservation, and noise.
UNIVERSE OF PROPERTIES TO BE
ACQUIRED BY THE FOREST SERVICE
UNDER THE SANTINI-BURTON ACT
------------------------------------------------------------ Letter :3
After the Santini-Burton Act was enacted, the Forest Service planned
to acquire about 20,000 acres of land under the land buyout program
authorized under the act. In addition, the two states that surround
Lake Tahoe--California and Nevada--have buyout programs to acquire
about 5,500 acres and about 600 acres, respectively, of
environmentally sensitive lands in the basin. Appendix II discusses
these state buyout programs in more detail.
The Forest Service considered input and guidance from local
government agencies, particularly TRPA, in estimating the amount of
private environmentally sensitive lands to be acquired under its
buyout program. The Forest Service makes offers for properties at
their fair market value as determined by independent appraisals. The
offers are either accepted or rejected by property owners.
Through February 10, 1994, the Forest Service had acquired 3,378
parcels (3,183 of them by purchase agreements, including 495 that
involved multiple parcels, and the remaining 195 by donations)
totaling about 11,000 acres. Through July 1994, a total of about
$86.5 million (including about $7 million in grants from California)
had been spent by the Forest Service for land acquisitions and
related administrative expenses. The bulk of the acquisition funds
came from the proceeds of Bureau of Land Management land sales in
Clark County, Nevada.\7 The Forest Service planned to make offers
during fiscal year 1994 for about 100 additional parcels. Although
the land acquisition program has slowed considerably in the past few
years, the Forest Service hopes to purchase 900 additional parcels
totaling about 9,000 acres (including the 100 parcels planned for
acquisition in 1994).
--------------------
\7 Santini-Burton Act funds represent dollars spent during different
years and, therefore, having different economic values. We did not
express this amount in 1994 dollars because Forest Service officials
at the Lake Tahoe Basin Management Unit do not maintain documentation
on the amount spent by year for property acquisition.
TRPA'S LAND CLASSIFICATION
AFFECTS FAIR MARKET VALUE OF
TAHOE BASIN PROPERTIES
------------------------------------------------------------ Letter :4
The issue of fair market value has caused much concern for many
property owners in the Tahoe basin. One of the keys to a property's
fair market value is its potential for development. Since 1989,
single-family residential parcels within the basin have been
evaluated under the IPES process to determine their potential for
development.
The Forest Service must offer fair market value for land purchased
under the Santini-Burton Act buyout program. Independent appraisers
who evaluate land parcels within the basin for the Forest Service
consider a parcel's IPES score as one of the most critical
determinants of the parcel's appraised value. For the 135
acquisitions reviewed, the Forest Service required independent
appraisals and paid the resulting estimated fair market value for
each of the properties.
DEVELOPMENT POTENTIAL
INFLUENCES FAIR MARKET VALUE
---------------------------------------------------------- Letter :4.1
The numerical IPES score that is assigned to a parcel in the Tahoe
basin is an important consideration in the determination of the
parcel's fair market value. This score can range in value from 0 to
1,140. Originally, it was established that a parcel with an IPES
score of 726 or higher would immediately be eligible for development,
while a parcel with a low IPES score would not immediately be
eligible. Whereas the market value of a property with a high IPES
score would likely be increased, the market value of a property with
a low IPES score would likely be diminished. Real estate brokers in
the basin told us that in California, for example, a lot that cannot
be developed has about one-fourth to one-third the fair market value
of a lot that can be developed.
Appraisal reports we reviewed support this contention. Many
appraisals prepared for the Forest Service show that the fair market
value of a property was based to a great extent on its potential for
development. One appraisal report, which included an analysis of 19
lots in Washoe County, Nevada, stated, for example, that "residential
lots suffering from development constraints would have a value of
from 33 percent to 80 percent of their value assuming that they could
be developed without undue delay."
The fair market value determination required for a Forest Service
acquisition under the Santini-Burton Act must be made by an
independent appraiser, where practicable, on the basis of comparable
sales at the time of acquisition. Comparable sales are sales that
are similar in time, location, type of property, and intended use
after sale. They are used to determine that the price paid fairly
represents the property's value. In determining the comparability of
other property sales, the appraiser must also consider the utilities,
services, and facilities associated with the properties being
compared.
Determining the fair market value of land parcels in the Tahoe basin
has been difficult. Because opportunities for development in the
basin have been limited over the past several years, data on
relatively few sales are available for comparison. Thus, appraisers
often must use other evidence to arrive at a property's fair market
value. Other evidence that may be considered includes the view
afforded by the property; its relation to points of interest or
importance; the price at which the property was bought (if recent
enough to reflect on the current value of the property); expert
opinion on the property's value; the uses for which it is available,
which are affected by, among other things, its IPES score and the
amount of the parcel that can be covered with a home, a driveway,
etc.; and the cost of any improvements (if they increase the
property's value). According to Forest Service officials, appraisers
are not to add taxes, interest, and other expenses incurred by the
landowner to the property's last sale price to arrive at the current
fair market value.
The issue of defining "fair market value" as it pertains to the
Santini-Burton Act has come under scrutiny by the Forest Service. Of
concern to Forest Service officials at the Lake Tahoe Basin
Management Unit was the following statement in the act.
"Any change after the date of the enactment of this Act in the
value of any property to be acquired under this section shall
not be taken into account for purposes of determining the fair
market value of such property to the extent that such change is
attributable to the enactment of this Act."
Questions arose as to whether this language was intended to exclude
consideration of changes in such areas as zoning, ownership of
development rights, number of units allowed per acre, or restrictions
on lot coverage--any one of which could significantly affect a
property's valuation.
In response, Management Unit officials were advised by Forest Service
regional officials and by the Department of Agriculture's Office of
the General Counsel that the intent of the wording in the
Santini-Burton Act was to negate any change in the value of the land
resulting only from the act itself. We were told that the language
cited did not refer to any legislation, zoning ordinance, or
restriction imposed by a local agency that was not a direct result of
the act. Therefore, according to the regional and Office of the
General Counsel officials, independent appraisers evaluating land
parcels for the Forest Service should consider a parcel's numerical
IPES score in the normal valuation process.
GAO ANALYZED A SAMPLE OF
FOREST SERVICE PURCHASES IN
THE BASIN
---------------------------------------------------------- Letter :4.2
The Forest Service began acquiring land under the Santini-Burton Act
in 1982. We reviewed 135 randomly selected land purchases from the
2,688 purchases of individual parcels made by the Forest Service from
1982 through February 10, 1994.\8 We found that, for each of the 135
purchases, an appraisal had been performed and the Forest Service had
paid the resulting estimated appraised fair market value for each
parcel.
Although we reviewed appraisal reports when available, we did not
review the qualifications of the appraisers or determine whether
standard appraisal requirements had been followed. However, the
Department of Agriculture's Office of Inspector General is reviewing
Forest Service land purchases nationwide, including some made through
the Santini-Burton buyout program. This review will include
determinations as to whether (1) appraisals conform with federal
regulations and (2) appraisers possess proper qualifications.
Sufficient data were available in 115 of the 135 cases we reviewed
for us to determine the difference between the sellers' costs to
obtain the parcels and the prices paid by the Forest Service for
them. Thus, our estimates apply to an estimated 2,256 of the 2,688
individual land purchases made by the Forest Service since 1982. We
calculated that the Forest Service paid an average acquisition price
of about $23,600 for these 2,256 parcels. The prices of our sampled
parcels ranged from $1,000 to $187,000, and the parcels ranged in
size from 0.05 acre to 12.7 acres. The prior owners in our sample
had held their properties for periods of less than 1 year to over 30
years.
Overall, we estimate that almost 76 percent of the time, those
selling property to the Forest Service received more for their land
than they had paid for it. For the parcels in our sample, the
differences ranged from $250 to $120,500. In almost 22 percent of
the cases, the owners received less for their land than they had paid
for it. The differences ranged from $500 to $35,000. We estimate
that for fewer than 3 percent\9 of the purchases, the Forest Service
paid the owners the same amounts that the owners had paid for the
parcels.
The above calculations do not account for any inflation that might
have occurred over the time that the owners held their properties,
which would have reduced the purchasing power of the dollar between
the dates that the owners purchased the parcels and the dates that
they sold the parcels to the Forest Service. Our analyses showed
that when inflation was factored in, about 36 percent of the owners
received more than they had spent to acquire the properties. The
increases ranged from $245 to $107,810. The remaining 64 percent of
the owners received less for their properties from the Forest Service
than they had spent. The decreases in value ranged from $462 to
$53,200.
Developed in response to your concerns about property owners who
acquired their lands prior to December 1969--the date of the original
Tahoe Regional Planning Compact--table 1 shows the experiences of
owners we sampled who acquired their parcels before and after that
date. The table includes both the unadjusted and inflation-adjusted
number and percentage of owners we reviewed who received more than,
less than, or the same amount from the Forest Service as they paid
for their parcels.
Table 1
Number and Percent of Tahoe Property
Sales for Which Forest Service Purchase
Price Was Greater Than, Less Than, or
the Same as Owner's Purchase Price--
Unadjusted and Adjusted for Inflation
Number
without Number
adjusting adjusting
for for
inflation Percent inflation Percent
--------------------------------- ------------ -------- ------------ -------
Property acquired before December
1969
Forest Service price greater
than 18 90\a 5 25
owner's cost
Forest Service price less than
owner's 1 5\a 15 75
cost
Forest Service price same as
owner's 1 5\a 0 0
cost
================================================================================
Total 20 1 00 20 100
Property acquired after December
1969
Forest Service price greater
than 69 73 3\6 39
owner's cost
Forest Service price less than
owner's 23 24 57 61
cost
Forest Service price same as
owner's 2 2\a 0 0
cost
================================================================================
Total 94 99 93 100
Property acquired before and
after December 1969
Forest Service price greater
than 87 76 41 3\6
owner's cost
Forest Service price less than
owner's 25 22 72 64
cost
Forest Service price same as
owner's 3 3\a 0 0
cost
================================================================================
Total 115\b 101 113\c 100
--------------------------------------------------------------------------------
Note: Information required for our analyses was not available for
all sampled cases. Therefore, our analyses do not represent all
2,688 land purchases. See table IV.1 for the estimated number of
land purchases to which these analyses apply.
\a Because of the small sample size or other characteristics of the
sample results, these results must be qualified. See table IV.1 for
further details.
\b We could not determine whether one property was acquired before or
after December 1969; therefore, our calculations for the pre- and
post-December 1969 acquisitions do not equal the total acquisitions.
\c The total number of cases dealt with under the
"inflation-adjusted" column is smaller than that under the
"unadjusted" column because certain information required to compute
the adjusted amount was not available.
As shown in table 1, we estimate that of the property owners who had
acquired their parcels before December 1969, 5 percent\10 received
less than they had originally paid for the parcels. (When inflation
is factored into the calculation, an estimated 75 percent of these
owners received less than they had paid.) We estimate that of the
owners who had acquired their parcels after December 1969, about 24
percent received less from the Forest Service than they had paid.
(When inflation is considered, an estimated 61 percent received less
than they had paid.)
Although the estimates in table 1 reflect the effect of inflation
over the period in which properties were held before being sold to
the Forest Service, our calculations do not consider other possible
costs incurred by property owners during this period. Such costs
include finance charges, property taxes, community association fees,
and sewer hookup fees. These other costs could be important from an
investment standpoint for these owners. However, the fact that some
owners might receive less from the Forest Service than they had
invested in their properties was addressed by former Representative
Phillip Burton, one of the coauthors of the Santini-Burton Act, who
stated that
". . . this legislation was never intended to indemnify those
owners from all risks they might have accrued when they chose to
invest in such property."
Appendix III provides details on the location, size, purchase dates,
and purchase price of the 135 transactions reviewed.
--------------------
\8 Because we sampled land purchases, each estimate used in this
report has a margin of error. See app. IV for a discussion of our
sampling procedures and the margins of error for estimates in the
report.
\9 Because of the small sample size or other characteristics of the
sample results, this estimate must be qualified. See table IV.1 for
further details.
\10 Because of the small sample size or other characteristics of the
sample results, this estimate must be qualified. See Table IV.1 for
further details.
THE FOREST SERVICE DID NOT TAKE
PRIVATE PROPERTY
------------------------------------------------------------ Letter :5
We do not believe that any of the 135 randomly selected Forest
Service acquisitions reviewed involved takings by the federal
government of private property without just compensation. Rather,
the Forest Service purchased the properties from willing sellers for
their fair market value at the time of purchase as determined by
independent appraisers. TRPA's land-use regulations probably
contributed toward the Forest Service's paying some property owners
less for their parcels than would have been the case had no
restrictions been placed on the properties' development. However, in
one instance, the Nevada Supreme Court ruled, in 1993, that TRPA's
regulations do not constitute a temporary taking of property for
which just compensation must be paid under the U.S. Constitution.\11
Nonetheless, many owners of property in the basin continue to assert
that TRPA's land-use controls result in takings of their private
property.
The determination as to whether specific land-use controls, such as
zoning ordinances, which limit the permissible uses of private
property, result in a compensable government taking of private
property will generally depend on the facts of the particular cases
rather than the application of a set formula. However, courts will
consider certain factors, including whether the land-use controls
substantially advance a legitimate government interest and whether
owners have been deprived of all economically viable use of their
properties.
--------------------
\11 Kelly v. Tahoe Regional Planning Agency, 855 P.2d 1027 (Nev.
1993).
THE FOREST SERVICE PURCHASED
PROPERTIES FOR FAIR MARKET
VALUE
---------------------------------------------------------- Letter :5.1
The taking of private property for public use by the federal
government is addressed under the Fifth Amendment to the U.S.
Constitution, which states that ". . . private property [shall
not] be taken for public use, without just compensation." This
prohibition is made applicable to state actions affecting private
property through the due process clause of the Fourteenth Amendment
to the U.S. Constitution and is applicable to a bistate agency, such
as TRPA. The Fourteenth Amendment provides that a state may not
"deprive any person of life, liberty, or property, without due
process of law; . . . ." The acquisition of property without just
compensation is considered a deprivation of property without the due
process of law.
Both the federal government and state governments regularly exercise
the power of "eminent domain." This power is exercised through the
use of court condemnation procedures and refers to these governments'
sovereign right to take private property for public purposes and uses
without the consent of the owner upon the payment of just
compensation. Governments have also acted short of condemnation to
limit the permissible uses of property by statute, regulation, and
administrative actions. If these limitations are sufficiently
severe, they also may amount to a taking of property under the Fifth
and Fourteenth Amendments and may lead to an "inverse
condemnation"\12 court action seeking the payment of just
compensation.
When a government purchases private property at its fair market value
at the time of sale, the purchase is not considered to be a taking.
The private party is not compelled to sell the property but
voluntarily decides to do so after considering the different
opportunities for the property, including its retention or sale to
someone else. In the 135 Santini-Burton Act transactions we
reviewed, the Forest Service did not take properties from owners.
The Forest Service bought the properties from owners in arms-length
transactions, without any compulsion, at the present fair market
value as determined by independent real estate appraisers.
--------------------
\12 "Inverse condemnation" is an action brought by a property owner
seeking just compensation for land taken for a public use when the
taker, a government (or a private entity having the power of eminent
domain), does not intend to bring eminent domain proceedings. Such
an action may be brought when the government denies there is any
taking.
TRPA'S LAND-USE RESTRICTIONS
ARE THE SUBJECT OF COURT
SUITS
---------------------------------------------------------- Letter :5.2
Several recent court cases have addressed the issue of whether TRPA's
land-use restrictions constitute a taking of private property for
which compensation must be paid under the Fifth and Fourteenth
amendments. In Kelly v. TRPA, which involved a plan to develop 39
lots in three stages, the owner claimed that TRPA's land-use
restrictions constituted a taking because they restrained development
on 7 of the lots. The Nevada Supreme Court concluded that TRPA's
land-use controls did not constitute a temporary taking.
The Nevada Supreme Court described what the U.S. Supreme Court
requires a plaintiff to show in order to establish that land-use
restrictions, such as those imposed by TRPA, amount to a compensable
temporary taking of private property.\\13 Each case involves an ad
hoc factual inquiry to determine whether (1) the land-use controls
substantially advance a legitimate government interest and (2) the
owner has been deprived of all economically viable use of the
property. In determining the latter, three factors must be
considered, including (1) the economic impact of the land-use
restrictions, (2) the interference of these restrictions with the
owner's reasonable investment-backed expectations, and (3) the
character of the government's action.
The Nevada Supreme Court concluded that TRPA's regulations advanced a
legitimate government interest--the protection of the Lake Tahoe
Basin, which is a national treasure. The court also concluded that
the land-use restrictions did not deprive Mr. Kelly of all
economically viable use of his land. The court pointed out that the
lots as a whole remained a valuable asset, since only seven lots were
affected by TRPA's regulations. Of these seven, only four are
presently precluded from development, and these parcels are expected
to be eligible in a few years.
The court also concluded that the owner's investment expectations had
been met. At the time he purchased the plots, Mr. Kelly was aware
of potential development restrictions in the Lake Tahoe area. Also,
his land was worth considerably more than he had paid for it.
Furthermore, the court considered that TRPA's regulations benefited
not only the public but also Mr. Kelly himself because, without
environmental land-use controls, his lots would diminish in value
over time.
The taking issue is also presently the subject of two pending federal
court cases. The first of these cases--Tahoe Sierra Preservation
Council, et al. v. TRPA, et. al--consolidates identical cases
brought originally in the federal district courts of Nevada and
California. The Federal Court of Appeals for the Ninth Circuit
recently decided to return the case to the federal district court for
consideration of the taking issue. The suit asserts that TRPA has
violated the civil rights of landowners under federal law by enacting
regulations restricting the use of their property. However, TRPA has
subsequently petitioned the Ninth Circuit Court for a rehearing of
its case. In the second case--Suitum v. TRPA, et al.--a landowner
is claiming that TRPA's IPES constitutes a taking, that is, an
inverse condemnation. The case has been appealed to the Ninth
Circuit Court following the federal district court's dismissal of the
case on the ground that the plaintiff did not exhaust her
administrative remedies before bringing suit.
These cases do not settle the question under what circumstances, if
any, TRPA's regulations could result in a taking of property. The
U.S. Supreme Court's most recent decision on whether local land-use
controls result in a taking is in Dolan v. City of Tigard, 129 L.
Ed. 2d 304 (1994). Quoting from one of its earlier decisions, the
Supreme Court noted that "'Government hardly could go on if to some
extent values incident to property could not be diminished without
paying for every such change. . . .'" Thus, a decline in property
values resulting from state or local regulation does not
automatically result in a taking of private property.
In Dolan, the Supreme Court described a two-part inquiry for
determining whether state or local land-use regulation results in a
taking of private property that requires the payment of just
compensation. A court first must determine whether there is an
essential connection between the legitimate public interest and the
prescribed governmental regulatory action. Second, if there is such
a connection, the court must determine whether the degree of
regulation is reasonably related to the projected impact of the
landowner's use of the property. Under what circumstances, if any,
TRPA's regulations may constitute a taking of private property will
depend on the facts involved in future court cases.
--------------------
\13 The plaintiff's assertion that the Supreme Court's decision in
Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886 (1992)
governed was rejected on the basis that Lucas involved a permanent
rather than a temporary taking of property. In Lucas, the
governmental action prohibited any permanent structure on Lucas's
residential lots.
ENVIRONMENTALLY SENSITIVE
LANDS RETAIN VALUE
---------------------------------------------------------- Letter :5.3
It appears that the numerical IPES score or the Bailey Land
Classification System rating of land in the Lake Tahoe Basin may be
the most critical factor in an appraiser's valuation of a parcel. In
this regard, the Nevada Supreme Court has concluded that TRPA has
based IPES on solid scientific principles and that it has rationally
and evenly applied the scoring system.
Although TRPA's land-use restrictions probably diminished the fair
market value of some Tahoe basin properties, the assignment of an
IPES score categorizing a parcel as currently not developable
(originally, an IPES score of 725 or less) does not forever preclude
the parcel's development. TRPA may, on an annual basis, adjust the
minimum IPES eligibility score in any of the counties surrounding the
basin, thus rendering as immediately developable some parcels
previously considered undevelopable.
However, TRPA will not make such an adjustment unless it finds, among
other things, that a local jurisdiction has satisfactory programs in
place for monitoring water quality and inspecting projects for
compliance with monitoring standards. During our review, TRPA found
that Douglas and Washoe counties in Nevada met its adjustment
criteria and lowered the IPES threshold scores from 726 to 709 and
695, respectively. This finding made numerous additional parcels in
these two counties immediately eligible for development and
presumably increased their fair market value.
Even land parcels in the basin receiving very low IPES scores retain
some economic value because they are generally assigned some area of
allowed surface coverage (the square footage of the parcel that may
be covered by any impervious surface--such as a dwelling--that does
not permit vegetation to grow or precipitation to reach the ground).
This surface coverage allowance may be transferred to other currently
developable lots in the same watershed. In addition, in both 1993
and 1994, TRPA authorized up to 30 owners of undevelopable lots to
receive TRPA building allocations. While these owners are not
currently allowed to build on their lots, the allocations may be
transferred to other lots that are developable according to their
IPES scores but do not have one of TRPA's limited annual building
allocations. The owners of the parcels that are developable
according to their IPES scores can then proceed to build on the lots.
The allocations have sometimes commanded substantial prices.
We could not quantify the effect of the IPES score on a parcel's fair
market value because other factors must be considered. These include
(1) a generally unfavorable economic situation in the Lake Tahoe
Basin during the 1980s and early 1990s, (2) numerous environmental
constraints on any type of development within the basin, and (3)
local building requirements and/or restrictions. However, as
explained above, we determined that even parcels with low IPES scores
remained valuable assets. As the IPES threshold is lowered over
time, some parcels' value could increase.
Nonetheless, many Tahoe basin property owners, hoping for reasonable
returns on their investments in their properties, have expressed
disappointment as property values in many cases have gone down,
rather than up. However, as the Nevada Supreme Court noted (in the
recent Kelly case), as early as 1966, even before the 1969 Tahoe
Regional Planning Compact was entered into by the states of
California and Nevada and ratified by the Congress, property owners
were on notice about the two states' concerns about the rapid
development in the basin and the adverse impacts on the area's
environment associated with the development. Thus, since at least
1969, the property owners should have had some expectation of the
future implementation of restrictions on growth in the basin.
AGENCY COMMENTS
------------------------------------------------------------ Letter :6
Although we did not obtain written agency comments on a draft of this
report, we discussed the results of our work with the Forest
Supervisor of the Lake Tahoe Basin Management Unit and its land and
realty specialists and with the Executive Director and the Deputy
Director, TRPA, and incorporated their comments where appropriate.
These officials generally agreed with the facts presented in the
report.
---------------------------------------------------------- Letter :6.1
We conducted our review between December 1993 and August 1994 in
accordance with generally accepted government auditing standards. We
interviewed and/or obtained information from Forest Service officials
at the agency's headquarters in Washington, D.C.; Region 5 office in
San Francisco, California; and Lake Tahoe Basin Management Unit in
South Lake Tahoe, California. This Management Unit administers the
Santini-Burton Act land acquisitions in the entire Lake Tahoe Basin.
Also, we reviewed a sample of 135 randomly selected case files for
Forest Service Santini-Burton Act land purchases and interviewed
numerous persons familiar with property transactions in the basin.
Appendix IV contains more details on our objectives, scope, and
methodology.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this letter. At that time, we will send copies to
the Secretary of Agriculture and the Chief of the Forest Service. We
will make copies available to others on request. Please contact me
at (202) 512-7756 if you or your staff have any questions. Major
contributors to this report are listed in appendix V.
Sincerely yours,
James Duffus III
Director, Natural Resources
Management Issues
DISTRIBUTION AND PERCENT OF IPES
SCORES, JUNE 1988
=========================================================== Appendix I
Table I.1 shows the initial distribution of IPES scores for over
10,000 parcels in the Lake Tahoe Basin. IPES scores range from 0 to
1,140. The lower the IPES score, the more environmentally sensitive
the parcel was deemed to be and the less likely it would become
available for immediate development. Originally, parcels with scores
of 725 or below were deemed environmentally sensitive and therefore
were not generally available for immediate development. However,
some environmentally sensitive parcels were allowed to be built on if
the property owners paid mitigation fees. And, as previously
mentioned, upon finding that Washoe and Douglas counties in Nevada
had met TRPA's criteria for lowering the IPES threshold scores, TRPA
lowered the threshold scores in the two counties to 695 and 709,
respectively. Thus, more than 50 parcels in these counties
previously considered undevelopable became eligible for immediate
development.
Table I.1
Distribution of Original IPES Scores,
June 1988
Number of
IPES score range parcels Percent
-------------------------------- ---------------- --------
0 884 8.5
1-300 52 0.5
301-400 83 0.8
401-500 281 2.7
501-600 707 6.8
601-700 1,456 14.0
701-800 2,652 25.5
801-900 2,683 25.8
901-1,000 1,435 13.8
Over 1,000 166 1.6
============================================================
Total 10,399 100.0
------------------------------------------------------------
Note: In December 1988, subsequent to the above scoring of parcels
in the Tahoe basin, TRPA's Governing Board established the
developable IPES threshold score at 726 or higher. We did not
recompute the distribution of parcels that had IPES scores above and
below 725 because of the amount of time involved in making such an
analysis.
Source: Harrison Appraisal, Inc.
LAND BUYOUT PROGRAMS IN CALIFORNIA
AND NEVADA
========================================================== Appendix II
In addition to the Forest Service's Santini-Burton Act land purchase
program, programs exist in California and Nevada for acquiring
environmentally sensitive lands in the basin. The states' programs
are briefly described below.
CALIFORNIA TAHOE CONSERVANCY
LAND ACQUISITION PROGRAM
-------------------------------------------------------- Appendix II:1
On the California side of Lake Tahoe, the California Tahoe
Conservancy administers a land buyout program that is similar to the
Forest Service's Santini-Burton Act program in that it acquires
environmentally sensitive properties at the current fair market
value. The California program is financed by an $85 million state
bond sale. Under the program, the first parcel was acquired in 1986.
At the time of our review, the average price paid for parcels
acquired under the program was about $11,200. The acquisition costs
ranged from $250 for a small parcel to about $2.8 million for a
36-acre parcel, a portion of which bordered the lake. Through August
1994, about 4,600 of the originally planned 5,500 acres had been
acquired.
NEVADA LAND ACQUISITION PROGRAM
-------------------------------------------------------- Appendix II:2
In November 1986, the voters of Nevada approved a $31 million bond
issue for acquiring environmentally sensitive property and funding
erosion-control projects on the Nevada side of Lake Tahoe. The first
parcel was obtained under the program in 1987. While the Forest
Service, under its buyout program, must pay the current fair market
value for property it acquires in the Tahoe basin, the act governing
Nevada's land acquisitions mandates that the state acquire property
at the greater of the current fair market value or the value existing
either on July 1, 1980, or on the date the property was acquired
after July 1, 1980. Because land prices in the basin peaked around
1980 and have dropped considerably since that date, the state would
rarely have purchased land for the current fair market value.
The Nevada Department of Conservation and Natural Resources, Division
of State Lands, estimated that--through August 1994--the average
purchase price for the 491 parcels in the basin that the state had
purchased was about $51,800, excluding survey and appraisal fees.
The purchase prices of the acquired parcels ranged from $3,000 to
$375,000 for single-parcel acquisitions. The 491 parcels, which cost
about $25 million, totaled about 200 acres, or one-third of the
program's 600-acre acquisition goal.
INFORMATION ON 135 FOREST SERVICE
LAND ACQUISITIONS IN THE LAKE
TAHOE BASIN SAMPLED BY GAO
========================================================= Appendix III
Table III.1 provides information on the 135 cases GAO sampled of land
purchases by the Forest Service within the Lake Tahoe Basin. The
table is followed by more detailed discussion of three of the cases.