Ski Area Permit Fee System

DEPARTMENT OF AGRICULTURE

Forest Service

RIN NO. 0596-AB49

Ski Area Permit Fee System

AGENCY: Forest Service, USDA.

ACTION: Notice of proposed policy; request for public comment.

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SUMMARY: The Forest Service proposes to revise existing procedures for

determining permit fees for the use of National Forest System lands by

ski areas. Permit fees for most ski areas operating on National Forest

System lands are determined under the graduated rate fee system (GRFS).

As applied to large ski areas, GRFS is complex and costly to administer

and has been the subject of several audits, administrative appeals, and

lawsuits. Under the proposed policy, the agency would determine permit

fees by site-specific appraisal of the use of National Forest System

lands by ski areas. The proposed system would produce ski area permit

fees that are based on fair market value as required by law; would be

simpler and less costly to administer than GRFS; would eliminate the

need for burdensome audits of ski area assets and revenues for those

ski areas under the new system; and would make individual fee

determinations in a nationally consistent manner.

DATES: Comments must be received in writing by September 11, 1995.

ADDRESSES: Send written comments to the Recreation, Heritage, and

Wilderness Resources Staff (2340), Forest Service, USDA, P.O. Box

96090, Washington, DC 20090-6090.

FOR FURTHER INFORMATION CONTACT:

Lyle Laverty, Director, Recreation, Heritage, and Wilderness Resources

Staff, (202) 205-1706.

SUPPLEMENTARY INFORMATION:

Background

Today there are 155 national forests comprising approximately 191

million acres in 42 States, the Virgin Islands, and Puerto Rico. These

forests, together with 20 national grasslands, land utilization

projects, purchase units, and other lands, constitute the National

Forest System.

The National Forest Ski Area Permit Act of 1986 authorizes the

Forest Service to issue permits for the use and occupancy of suitable

lands within the National Forest System for nordic and alpine skiing

operations and purposes (16 U.S.C. 497b). Ski area permits issued

before the effective date of the National Forest Ski Area Permit Act

are authorized by the Term Permit Act (16 U.S.C. 497) and the Forest

Service's Organic Act (16 U.S.C. 551). The Forest Service issues

special use permits to ski areas for the use and occupancy of National

Forest System lands in accordance with 36 CFR part 251, subpart B.

Permit fees for ski areas operating on National Forest System lands

must be based on fair market value (16 U.S.C. 497b(b)(8); 31 U.S.C.

9701; 36 CFR 251.57).\1\ Direction on the graduated rate fee system

(GRFS), the current permit fee system for most ski areas operating on

National Forest System lands, can be found in Forest Service Manual

Chapter 2710, Special Uses Management, Section 2715, Fees.

\1\ In this context, fair market value is the annual amount in

cash or on terms reasonably equivalent to cash for which in all

probability the property(ies) would be permitted to be used, sold,

or leased by a knowledgeable owner willing but not obligated to

permit the use or sell or lease the property(ies) to a knowledgeable

permit holder, buyer, or lessee who desires but is not obligated to

hold the permit or buy or lease the property(ies). In ascertaining

that figure, consideration should be given to all matters that might

be brought forward and reasonably be given substantial weight in

bargaining by persons of ordinary prudence, but no consideration

whatever should be given to matters not affecting market value (see

Interagency Land Acquisition Conference, ``Uniform Appraisal

Standards for Federal Land Acquisitions,'' pp. 3-4 (1992)).

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There are 120 alpine or alpine and nordic ski areas operating on

National Forest System lands that pay annual permit fees determined

under GRFS. Seventeen alpine or alpine and nordic ski areas operating

on National Forest System lands pay annual flat permit fees based

either on GRFS principles or a percentage of land value.

Graduated Rate Fee System (GRFS)

GRFS has been in effect for more than two decades and is complex

and difficult to administer for ski areas.

GRFS uses a standardized formula to obtain a percentage of the ski

area's gross revenues Fees are calculated by applying scheduled rates

to the ski area's sales revenue. Which rate applies is determined by

the proportion of the ski area's sales revenue to the ski area's gross

fixed assets (GFA): as sales revenue increases in relation to GFA, a

higher rate is applied and the total fee increases; as sales revenue

decreases in relation to GFA, lower rates apply and the total fee

decreases.

GRFS divides the ski area's sales revenue into nine business

categories (such as revenue from lifts, tows, and ski schools; rentals

and services; and merchandise) and applies a different profitability

indicator or break-even point to each category. The break-even point,

expressed as the ratio of sales revenue to GFA, is the point at which a

business begins to show a return on investment.

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Each business category has two rates: a rate base and a balance-of-

sales rate. The rate base is the percentage of sales revenue the

average ski area pays as a fee when sales revenue is up to twice the

break-even point. A higher balance-of-sales rate is applied to all

sales revenue exceeding twice the break-even point.

To account for varying levels of productivity, fees are calculated

in three steps: (1) The fee applied to sales revenue up to the break-

even point is 50 percent of the rate base; (2) the fee applied to sales

revenue between the break-even point and twice the break-even point is

150 percent of the rate base; and (3) the fee applied to sales revenue

over twice the break-even point is the balance-of-sales rate.

If a ski area generates income from more than one business

category, each category's break-even point, rate base, and balance-of-

sales rate are multiplied by the percentage of the ski area's total

sales revenue that results from that category. Results for all

categories are totaled to obtain a composite break-even point, rate

base, and balance-of-sales rate. Composites are applied to gross sales

revenue to determine the fee. Fee determinations for each ski area are

periodically subject to audit by the Forest Service through the

examination of each ski area's financial records.

GRFS has proven to be very controversial, primarily because of

questions concerning whether GRFS meets the legal requirement to charge

a permit fee based on the fair market value of the use of National

Forest System lands by ski areas. The controversy surrounding GRFS and

assessment of the appropriate permit fee has generated appeals and

litigation and several audits by the General Accounting Office and the

Department of Agriculture's Office of Inspector General. These audits

concluded that GRFS does not ensure that the Forest Service receives a

permit fee based on fair market value from ski areas operating on

National Forest System lands.

Due to the historical controversy of the ski area permit fee issue

and the need for multidisciplinary expertise in this area, a

Departmental Working Group was formed in July 1994. This group, which

includes representatives from the Forest Service, the Office of

Inspector General, the Office of General Counsel, and the Office of the

Chief Financial Officer, has met regularly to expedite development of a

new ski area permit fee system based on fair market value.

Methods for Determining Fair Market Value

On September 26, 1994, the Forest Service awarded a contract to

identify methods pertinent to determining the fair market value of the

use of National Forest System lands by ski areas and to recommend

promising methods for testing. The contractor assembled a team of

specialists in various fields, including real estate appraisal, land

economics, and financial analysis, to work on the contract.

The contractor's December 19, 1994, report analyzes 14 valuation

techniques: Six land valuation methods (sales comparison, ground rent

capitalization, land residual, sales allocation, extraction, and

subdivision development); seven business valuation methods

(capitalization of earnings, excess earnings on assets, excess earnings

on sales, discounted cash flow, price/earnings ratio, dividend payout,

and net worth); and one additional valuation method (competitive

bidding). The report discusses the theoretical basis of each method,

its advantages and disadvantages, the required frequency of updating

for each method, and its applicability to assessing the fair market

value of the use of National Forest System lands by ski areas. The

report recommends testing seven valuation techniques in order of

preference: four land valuation methods (sales comparison, ground rent

capitalization, residual (both land and business), and allocation (in

conjunction with land residual)) and three business valuation methods

to be used in conjunction with the land valuation methods (capitalized

earnings, excess earnings on assets, and excess earnings on sales).

At the request of the Departmental Working Group, the Forest

Service contracted for a technical written review of the contractor's

report by two expert real estate appraisers. The two real estate

appraisers were asked to assess (1) whether the contractor's analysis

identifies all pertinent techniques for determining the fair market

value of the use of National Forest System lands by ski areas and (2)

whether the methods recommended by the contractor for testing are the

most likely methods on which a new ski area fee system could be based.

In their reports and during a teleconference with the Departmental

Working Group, the two appraisers advised that the contractor's report

covered all land valuation methods and the common business valuation

methods. With regard to the contractor's recommendations, the

appraisers advised that there is no need to test any of the business

valuation methods because none of these methods gives an independent

estimate of land value. Rather, these methods provide an estimate of

the value of a business. Consequently, neither appraiser believed that

any of the business valuation methods identified by the contractor

would assist in estimating the fair market value of the use of National

Forest System lands by ski areas.

To determine land value, one of the appraisers advised that the

first and most important step is to develop a database of sale and

rental transactions involving land used for skiing or for a use

comparable to skiing. He stated that based on his own research and

experience, data are available for comparable sales and rentals of land

used for skiing.

The appraiser explained that once the database of comparable

transactions is developed, the agency would be able to ascertain

whether the fair market value of the use of National Forest System

lands by ski areas can be determined. He advised that the direct

comparison and ground rent capitalization methods would provide the

most objective basis for making this determination.\2\ From this

information, the agency may then be able to decide whether subjective

methods, such as land residual, should be considered.

\2\ The direct comparison method produces a value estimate for

land by comparing the property being appraised to similar properties

that have sold recently, applying appropriate units of comparison,

and making adjustments to the sale prices of the comparables based

on the elements of comparison (United States Department of

Agriculture, Forest Service, ``An Analysis of Methodologies for

Determining the Fair Market Value of the Use of National Forest

System Land by Ski Areas'' [hereinafter Contractor's Report], p. 6

(1994)).

The ground rent capitalization method applies when property is

leased for a ground rent or some other type of fee. Ground rent is

the amount paid for the right to use and occupy land according to

the terms of a ground lease. Market-derived capitalization rates are

used to convert ground rent into the market value of the property.

While a Forest Service ski area permit is not a lease and does not

convey any interest in real property, the permit may be analogous to

a lease for the purpose of assessing the applicability of the ground

rent capitalization method to determine the fair market value of the

use of National Forest System land by ski areas (Contractor's

Report, pp. 10-11).

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Both appraisers underscored the weaknesses and subjectivity

inherent in applying the land residual method, particularly in

developing an estimate of business value \3\ that is independent from

the value of the land.\4\ Neither

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appraiser knew of an accepted methodology for independently estimating

business value, since it is always the final residual. Both appraisers

agreed that the land residual method could be applied only as a back-up

method to information gleaned from the direct comparison and ground

rent capitalization methods.

\3\ Business value accrues from items of intangible personal

property, such as marketing and managerial skill, an assembled work

force, working capital, trade names, trademarks, franchises,

patents, contracts, leases, and operating agreements (Contractor's

Report, Glossary).

\4\ The land residual method produces a value estimate for land

as a component of an investment by capitalizing the net income

allocated to land after the net income attributable to all other

investment components has been deducted from the total net income

(Contractor's Report, p. 11).

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Determination of Fair Market Value

The foregoing conclusions of the two appraisers were confirmed by

the Departmental Working Group in informal discussions with the

Assistant Chief Appraiser for the United States Department of Justice.

In addition, the Departmental Working Group discussed the potential

feasibility of performing site-specific appraisals to determine the

fair market value of the use of National Forest System lands by ski

areas. The Assistant Chief Appraiser informally advised that if site-

specific appraisals were performed, they should be complete, self-

contained appraisals prepared in accordance with the latest editions of

the ``Uniform Standards of Professional Appraisal Practice,'' published

by the Appraisal Foundation, and the ``Uniform Appraisal Standards for

Federal Land Acquisitions,'' published by the Interagency Land

Acquisition Conference. The purpose of the appraisal would be to

determine the fair market value of the use of National Forest System

lands by ski areas.

Specifically, he explained that the most defensible approach would

be to research leases of land comparable to the subject property, i.e.,

land suitable for nordic and alpine skiing. The appraiser would analyze

these leases to estimate the market rent for the comparable land, which

would be the fair market value fee for the subject property.

If there were inadequate market data to use this approach, the

appraiser would research and analyze sales of land comparable to the

subject property to estimate the market value of this land and compare

it with the subject property, making whatever adjustments were

necessary. Using the market value of the land derived from comparable

sources, the appraiser would determine the market value of the subject

property. Using the lease transactions and any other information

available (e.g., the rate of return on purchased land), the appraiser

would estimate a market-derived rate of return: the percentage to apply

to land value to determine a fair market value fee for the use of the

land. The appraiser would then apply the market-derived rate of return

to the market value of the subject property to determine the fair

market value fee for the use of the subject property.

To confirm the soundness of using site-specific appraisals, the

Departmental Working Group conducted additional discussions with

appraisers from several Federal agencies and one appraiser outside the

Federal Government. These appraisers agreed that site-specific

appraisals are the best tool for developing a new permit fee system.

Based on the contractor's report, the subsequent peer review of

that report, discussions with appraisers, and internal research and

discussions of the information gathered, the Forest Service decided

that a permit fee system based on site-specific appraisals is the most

technically and legally defensible way to meet the fair market value

requirement in the National Forest Ski Area Permit Act.

The agency believes that this approach would produce ski area

permit fees that are based on fair market value as required by law;

simplify the fee system; eliminate the need for burdensome audits of

ski area assets and revenues for those ski areas under the new system;

and make fee determinations in a nationally consistent manner. The

site-specific appraisals would produce value determinations derived

from the market. Rather than using a complex formula like GRFS, the new

system would establish permit fees by site-specific appraisal. The new

system would replace annual Forest Service calculation and verification

of permit fees with agency monitoring to ensure that ski areas pay the

annual permit fee determined by site-specific appraisal. Ski areas

under the new system would not have to undergo detailed agency audits

of their financial records for purposes of verifying fee

determinations. Fee determinations under the new system would be

nationally consistent because they would be determined by site-specific

appraisals performed under a contract awarded and administered by the

Forest Service headquarters office in Washington, D.C.

Site-Specific Appraisals

At approximately the same time as this proposed policy is published

in the Federal Register, the Forest Service will award a 1-year

contract (with four consecutive options to renew) to perform site-

specific appraisals of the 137 alpine and alpine and nordic ski areas

operating on National Forest System lands.\5\ Permit fees for each of

these ski areas would be determined directly by site-specific

appraisal. At this point, the agency anticipates that these appraisals

would be updated every five years, based on the five-year cycle for

performing site-specific appraisals. Disputes concerning fee

determinations under the new policy would be subject to the agency's

administrative appeal regulations at 36 CFR part 251, subpart C.

\5\ There are a small number of nordic ski areas that are

authorized independently from alpine ski areas under a Forest

Service commercial special use permit. These nordic ski areas are

covered by the National Forest Ski Area Permit Act, but would not be

subject to the new permit fee system unless site-specific appraisals

are performed for these areas.

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In the first year of the contract, site-specific appraisals will be

performed of a sample of 27 ski areas in six different strata based on

size of operation and type of fees paid. The universe for the

stratified simple random sampling design consists of 120 ski areas

identified from GRFS sales revenue data for fiscal year 1991 (the

fiscal year for which the most recent information is available),

compiled as of January 1995, and 17 ski areas that pay annual flat

permit fees based on GRFS principles, or a percentage of land value.

Based on GRFS sales revenue for fiscal year 1991, the 120 ski areas

were grouped into strata 1 to 5. The 17 ski areas that pay annual flat

fees based on GRFS principles or a percentage of land value were placed

in stratum 6.

Six ski areas with zero GRFS sales revenue were placed in stratum

1, and the largest ski area with GRFS sales revenue of over $40 million

was placed in stratum 5. The 113 remaining ski areas were placed in

strata 2 through 4 using the Cumulative Square Root of the Frequencies

methodology (W. Cochran, ``Sampling Techniques,'' pp. 127-131 (3d ed.

1977)), with respect to the GRFS sales revenue for those ski areas.

Fifty-one ski areas with $0 to $2 million in GRFS sales revenue were

placed in stratum 2; 33 ski areas with over $2 million and up to $7.3

million in GRFS sales revenue were placed in stratum 3; and 29 ski

areas with more than $7.3 and up to $40 million in GRFS sales revenue

were placed in stratum 4.

Within each stratum, ski areas were randomly selected for order of

appraisal. The ski areas in stratum 1 were selected with equal

probability, without replacement. The ski areas in strata 2 through 4

were selected with respect to their GRFS sales revenue using

probability proportional to size without replacement. The single ski

area in stratum 5 was selected with probability

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equal to one. The ski areas in stratum 6 were selected with equal

probability without replacement.

The ski areas in each stratum were distributed as evenly as

possible over a five-year period. Site-specific appraisals will be

preformed for all 137 ski areas, with samples of 27 ski areas selected

for years 1 through 3 and samples of 28 ski areas selected for years 4

and 5.

Applicability of New Permit Fee System

This proposed policy would automatically apply only to those ski

areas whose permits are issued under the National Forest Ski Area

Permit Act. Unlike permits issued under other authorities, these

permits contain a clause that allows the Forest Service to apply any

new permit fee system to the ski areas authorized by those permits (36

CFR 251.57(h)). This clause currently states that GRFS--

May be replaced in its entirety by the Chief of the Forest

Service if a new generally applicable fee system is imposed

affecting all holders of authorizations under Public Law 99-522 [the

National Forest Ski Area Permit Act]. Replacement shall become

effective on the beginning of the holder's business year following

establishment.

Ski Area Term Special Use Permit, Clause VI.A.2.

The new permit fee system would be applied to ski areas whose

permits are issued under the National Forest Ski Area Permit Act and

that are included in the first year of the appraisal contract only

after the work performed for that year has been completed, reviewed,

and accepted by the Forest Service. The new permit fee system would be

applied to ski areas whose permits are issued under the National Forest

Ski Area Permit Act and that are included in subsequent years of the

appraisal contract only after the work performed for those years has

been completed, reviewed, and accepted by the Forest Service. The

agency intends to have the new permit fee system in effect for the

1996-97 ski season for those ski areas that are included in the first

year of the appraisal contract and whose permits are issued under the

National Forest Ski Area Permit Act.

Ski area whose permits are not issued under the National Forest Ski

Area Permits Act would be placed under the new permit fee system when

they receive a new permit or when they elect to have their existing

permits amended. Any amendment to an existing permit would include the

new ski area permit fee clause; preference would be given to issuing a

new permit under the National Forest Ski Area Permit Act. New permits

for ski areas would be issued under the National Forest Ski Area Permit

Act and placed under the new system.

The new fee system would not apply to any other permit holders who

pay permit fees to the Forest Service under GRFS.

Public Meeting and Other Public Input Already Received

On February 1, 1995, the Forest Service held a public meeting to

obtain input on whether the agency had identified pertinent methods for

determining the fair market value of the use of National Forest System

lands by ski areas. The Forest Service made a compilation of the

methods identified by the contractor available to the public as a basis

for providing input. Notice of this meeting was published in the

Federal Register on January 19, 1995 (60 FR 3835, Jan. 19, 1995). The

agency also accepted written comments until February 10, 1995. No

methods other than those identified by the contractor were suggested by

members of the public.

Nine comments were received, four at the meeting and five in

writing. Two respondents commented that the Federal Government needs to

get fair market value for the use of National Forest System lands. One

of these respondents noted that if the public does not receive fair

market value for the use of Federal land, the private activity that

occurs on that land is being subsidized and the market for that type of

land is distorted. Two other respondents stated that a new fee system

should yield the same return as GRFS or a fair return for the use of

National Forest System lands.

One respondent commented that the fair market value of National

Forest System lands used by ski areas would be very low without timber

or the improvements made by ski areas.

Another respondent stated that the National Forest System lands

used have no inherent income-producing capability and that the ski

industry's return to the Government on what would otherwise be

unimproved land is very good, about $180 to $200 per acre per year,

compared to $1.80 per head month for Federal land used for grazing.

This respondent further commented that operating a ski area is like

snow farming without a Government subsidy: the Government makes money

even if the ski areas operating on National Forest System lands do not.

Another respondent commented that there is a necessary partnership

between the public and private sectors, given that the Government is a

risk avoider and that the private sector is a risk taker. This

respondent commented that the Government does not have experience at

taking risks and therefore cannot assess risks as well as the private

sector. This respondent noted that the ski industry adds value to the

National Forest System lands used for skiing, resulting in revenue for

the Government. This respondent stated that without this private sector

investment, the Government would not get any revenues. This respondent

also noted that there are three cardinal rules of real estate:

Location, location, and location.

Four respondents commented on GRFS. One noted that some of the

revenue from privately owned facilities at the base of the mountain is

counted in the GRFS calculation that would not be included if someone

besides the permit holder owned those facilities, and that GRFS seems

arbitrary as applied to revenue from those facilities.

Two respondents noted that while GRFS has outlived itself, many

studies on a new fee system have been done, more studies are

unnecessary, and the studies and data available should be used to make

a decision on a new system.

One respondent commented that his ski area had flourished under

GRFS because of GRFS's ability to adjust the marginal fee rates in

response to poor versus good snow years; GRFS's ability to reward

capital investment by assigning a lower average fee rate to ski areas

with a higher GFA; and his ski area's being totally on National Forest

System lands and not having to deal with the complexities of accounting

for revenues generated from both National Forest System and private

land. This respondent suggested that a new permit fee system should

adjust for poor versus good snow years; provide incentives for capital

investment; ease the administrative burden on small ski areas; and

provide methods for determining fees when part of a ski area's revenues

are derived from other than the use of National Forest System lands.

Another respondent criticized the ski area permit fee legislation

proposed in 1992, because it did not address the fair market value of

the use of National Forest System lands (this respondent stated that

the proposed bill was based on a percentage of revenue); because it did

not provide incentives for capital improvements that give ski areas a

break in fees during their initial start-up periods; and because it did

not adjust permit fees for poor snow years. This respondent commented

that GRFS is better than the legislation proposed in 1992.

Five respondents commented that the new fee system should be

simple. One

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respondent commented that there are a lot of expenses associated with a

ski area, such as fixed assets and snowmaking, and that it is difficult

to determine the value of the lands used by a ski area.

Three respondents noted that a new permit fee system should be

consistently applied to ski areas operating on National Forest System

lands. One respondent noted that GRFS is subject to too many

interpretations. Another commented that a new system should ensure that

ski areas of different sizes and characteristics pay equitable permit

fees. Four others stated that the new system should balance permit fees

between small and large ski areas.

One respondent commented that agency regulations allow for too much

flexibility and that industry wants legislation for stability. This

respondent noted that the stability of the fee determination should

correspond to the stability of the 40-year ski area permit, but that

industry would not object to scheduled updating of a legislated fee

formula.

One respondent stated that while use of National Forest System

lands by private, profit-generating activities may be both beneficial

and desirable, commercial permit holders have a responsibility to be

conscientious stewards of the land.

Federal Advisory Committee

A federal advisory committee was established on February 17, 1995,

to advise the Secretary of Agriculture on development of the new ski

area permit fee system (60 FR 9321, Feb. 17, 1995). A notice requesting

nominations to the advisory committee was published in the Federal

Register on February 24, 1995 (60 FR 10346, Feb. 24, 1995). The

advisory committee will review and report on the proposed policy during

the comment period. The advisory committee's comments will be addressed

in the final policy.

Proposed Manual and Handbook Revision

Detailed direction on GRFS is currently set forth in Forest Service

Manual (FSM) Chapter 2710, Special Uses Management, Section 2715, Fees.

Any outdated Manual direction will be revised or removed when the final

policy on the new ski area permit fee system is issued in Forest

Service Handbook (FSH) 2709.11, Special Uses Handbook, Chapter 30, Fee

Determination, Section 38, Ski Area Permit Fees.

The policy in FSM Chapter 2720, Special Uses Administration,

Section 2721.6, Winter Recreation, would be clarified and revised to

replace GRFS with the revised system basing ski area permit fees on

site-specific appraisals for those ski areas whose permits are issued

under the National Forest Ski Area Permit Act. The form number cited in

this section for ski area permits issued under the National Forest Ski

Area Permit Act also would be changed from Form FS-2700-24 to Form FS-

2700-5b, Ski Area Term Special Use Permit. The new permit fee clause

would appear in FSH 2709.11, Special Uses Handbook, Chapter 50, Terms

and Conditions, Section 53.1, Fees and Payments, Clause A-19, and in

the revised Form FS-2700-5b. The proposed policy from FSM Chapter 2720

and FSH 2709.11, Chapters 30 and 50, appears at the end of this notice.

Summary

The Forest Service believes that establishing ski area permit fees

by site-specific appraisal would produce ski area permit fees that are

based on fair market value as required by law; would be simpler and

less costly to administer than GRFS; would eliminate the need for

burdensome audits of ski area assets and revenues for those ski areas

under the new system; and would make individual fee determinations in a

nationally consistent manner.

Regulatory Impact

This proposed policy was reviewed under Executive Order 12866 on

Regulatory Planning and Review. The agency has determined that the

proposed policy is a significant action subject to Office of Management

and Budget (OMB) review because of the strong public interest expressed

in a new permit fee system for ski areas operating on National Forest

System lands.

Moreover, this proposed policy was considered in light of the

Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Permit fees for ski

areas operating on National Forest System lands must without exception

be based on fair market value (16 U.S.C. 497b(b)(8); 31 U.S.C. 9701; 36

CFR 251.57). In accordance with the Regulatory Flexibility Act, the

agency has conducted an initial Regulatory Flexibility Analysis

regarding the impact of this proposed policy on small entities. The

agency does not currently have all the data necessary for a

comprehensive analysis of the effects of this proposed policy on small

entities. Therefore, the agency is inviting comments concerning

potential impacts. In particular, the agency is interested in

determining the number and kind of small entities that may incur

benefits or costs from implementation of this proposed policy.

No Takings Implications

This proposed policy was reviewed for its impact on private

property rights under Executive Order 12630 of March 15, 1988, as

implemented by the United States Attorney General's Guidelines for the

Evaluation of Risk and Avoidance of Unanticipated Takings. Executive

Order 12630 would not apply to this proposed policy because it consists

of administrative changes governing authorization of the use and

occupancy of National Forest System lands. Forest Service ski area

permits do not grant any title or interest in lands or resources held

by the United States.

Civil Justice Reform Act

This proposed policy was reviewed under Executive Order 12778,

Civil Justice Reform. If this proposed policy is adopted, (1) all state

and local laws and regulations that conflict with this proposed policy

or that impede its full implementation would be preempted; (2) no

retroactive effect would be given to this proposed policy; and (3) it

would not require administrative proceedings before parties may file

suit in court challenging its provisions.

Controlling Paperwork Burdens on the Public

The information collection requirements that would be imposed by

this proposed policy and the new clause for the ski area permit form

have been approved for use by OMB through June 30, 1996, and assigned

control number 0596-0082. The agency estimates that the public

reporting burden for the collection of information in the proposed

policy and the new clause for the ski area permit form would be 12

hours per response.

Categorical Exclusion

This proposed policy would consist primarily of technical and

administrative changes related to the authorization of occupancy and

use of National Forest System lands. Section 31.1b of Forest Service

Handbook 1909.15 (57 FR 43180, Sept. 18, 1992) categorically excludes

from documentation in an environmental assessment (EA) or environmental

impact statement (EIS) ``rules, regulations, or policies to establish

Service-wide administrative procedures, program processes or

instructions.'' The agency's preliminary assessment is that this

proposed policy falls within this category of actions and that no

extraordinary circumstances exist which would require preparation of an

EA or

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an EIS. A final determination will be made upon adoption of the final

policy.

Dated: April 25, 1995.

Jack Ward Thomas,

Chief.

Proposed Manual and Handbook Revision

The Forest Service organizes its directive system by alpha-numeric

codes and subject headings. Only those sections of the Forest Service

Manual (FSM) and Handbook (FSH) that are the subject of this notice are

set out here. The audience for this direction is Forest Service

employees charged with issuing and administering special use permits

for ski areas.

Forest Service Manual

Chapter 2720--Special Uses Administration

Section 2721.6--Winter Recreation

2721.61b--Permit Fees. See FSH 2709.11, sections 38.1 and 38.2, for

direction on permit fee determinations for ski areas.

2721.61e--Ski Area Permit.

1. Use the National Forest Ski Area Permit Act (16 U.S.C. 497b) and

Form FS-2700-5b, Ski Area Term Special Use Permit (FSH 2709.11, sec.

38.1 and 38.2, and 53.1, Clause A-19) to issue new permits for nordic

and alpine ski areas.

4. Use the Land and Water Conservation Fund Act (16 U.S.C. 4601-

6a(c)) and Form FS-2700-4, Special-Use Permit (FSH 2709.11, sec. 41.)

to issue permits for nordic skiing conducted by an outfitter or guide,

except when this activity is associated with a ski area subject to the

National Forest Ski Area Permit Act.

6. Initiate conversion of existing ski areas to the new permit by

writing to current holders, providing them with a blank copy of Form

FS-2700-5b, Ski Area Term Special Use Permit, and inviting them to meet

individually with the authorized officer or his or her representative

to discuss the terms and conditions. The principal areas to be agreed

upon are the permit boundary and length of term.

[Following are revised subparagraphs listing examples of conditions

which could justify shorter tenure as provided by paragraph 7:]

7d. Capital investment in the ski area is less than $1 million.

7e. Ownership of the improvements is in transition, for example, in

trust, in receivership, or listed for sale.

7f. Public service required in the existing permit is not being

provided.

Forest Service Handbook 2709.11--Special Uses Handbook

Chapter 30--Fee Determination

38--Ski Area Permit Fees. This section establishes Forest Service

policy for determining permit fees for the use of National Forest

System lands by ski areas.

38.01--Authority. (FSM 2701.1; sec. 30.1). The following

authorities require that permit fees for ski areas operating on

National Forest System lands be based on fair market value: National

Forest Ski Area Permit Act (16 U.S.C. 497b), Independent Offices

Appropriations Act (31 U.S.C. 9701), and Forest Service special use

regulations on permit fees (36 CFR 251.57).

38.02--Objective. Collect permit fees based on the fair market

value of the use of National Forest System lands by ski areas.

38.03--Policy. Determine permit fees for ski areas according to one

of the following methods as directed by section 38.1:

1. Site-specific appraisal;

2. Graduated rate fee system (GRFS) (FSM 2715); or

3. Flat rate (FSM 2715.14).

38.04--Responsibility.

38.04a--Washington Office, Director, Recreation, Heritage, and

Wilderness Resources Staff. The Washington Office Director of

Recreation, Heritage, and Wilderness Resources has the responsibility

to:

1. Award and administer contracts for performing and updating site-

specific appraisals for the use of National Forest System lands by ski

areas, in coordination with the Lands Staff and the Procurement and

Property Staff and with review by the Office of the General Counsel.

2. Obtain and address recommendations in reports from the

Washington Office Director of Fiscal and Accounting Services on review

of the objectivity and integrity of the process used to establish or

update permit fees based on fair market value by site-specific

appraisal.

3. Establish and amend permit fees that are determined by site-

specific appraisal of the use of National Forest Service lands by ski

areas.

4. Distribute, with supporting documentation, permit fee

determinations that are assessed by site-specific appraisal to the

Forest Supervisors responsible for administering those fee

determinations.

38.04b--Washington Office, Director, Lands Staff. The Washington

Office Director of Lands has the responsibility to:

1. Provide technical assistance to the Washington Office Director

of Recreation, Heritage, and Wilderness Resources to award and

administer contracts for performing and updating site-specific

appraisals.

2. Provide a team of qualified appraisers to:

a. Review site-specific appraisals; and

b. Prepare a review appraisal report for site-specific appraisals.

38.04c--Washington Office, Director, Fiscal and Accounting Services

Staff. The Washington Office Director of Fiscal and Accounting Services

has the responsibility to:

1. Monitor and report to the Washington Office Director of

Recreation, Heritage, and Wilderness Resources on the objectivity and

integrity of the process used to establish or update permit fees for

ski areas based on fair market value by site-specific appraisal. The

process includes but is not limited to contracting for the services of

a qualified appraiser, work performed by the contractor, review and

acceptance of the contractor's work, and actions to establish permit

fees for ski areas from the work performed under contract.

2. Review adherence to Forest Service policy for ski area permit

fees determined by site-specific appraisal to ensure that the amount

paid by the ski areas corresponds to the amount determined by site-

specific appraisal; report any discrepancies to the Director of

Recreation, Heritage, and Wilderness Resources.

3. Review adherence to Forest Service policy on ski area permit

fees determined by site-specific appraisal to ensure that site-specific

appraisals are updated in accordance with Forest Service policy and

permit requirements; report any discrepancies to the Director of

Recreation, Heritage, and Wilderness Resources.

4. Establish guidelines for auditing ski area permit fees

determined under GRFS and review adherence to Forest Service policy on

GRFS and permit requirements; report any discrepancies to the Director

of Recreation, Heritage, and Wilderness Resources.

5. Establish guidelines for auditing ski area permit fees

determined by a flat rate and review adherence to Forest Service policy

on flat rate fees and permit requirements; report any discrepancies to

the Director of Recreation, Heritage, and Wilderness Resources.

38.04d--Authorized Officer. The authorized officer has the

responsibility to:

1. Amend ski area permits issued under the National Forest Ski Area

[[Page 36103]]

Permit Act in conformance with direction in sections 38.11b and 38.12c.

2. Amend ski area permits issued under authorities other than the

National Forest Ski Area Permit Act in conformance with direction in

sections 38.11b and 38.12c when:

a. The holder agrees to the amendment; or

b. The holder elects to have the permit amended for any other

purpose.

3. Issue new ski area permits under the National Forest Ski Area

Permit Act in conformance with direction in section 38.2.

4. Establish ski area permit fees that are determined under GRFS

(sec. 38.12a).

5. Establish ski area permit fees that are determined by a flat

rate (sec. 38.12b).

6. Bill holders for their use and occupancy of National Forest

System lands.

7. Ensure that holders are informed of their responsibility to pay

their permit fees promptly and in full.

38.1--Permit Fees for Existing Ski Area Permits.

38.11--Permits Issued Under National Forest Ski Area Permit Act.

Determine permit fees by site-specific appraisal for all ski areas

whose permits are issued under the National Forest Ski Area Permit Act.

These permit fees apply to all activities associated with the use and

occupancy authorized by the corresponding ski area permits, including

nordic and alpine skiing, outfitting and guiding, and recreation

events. Appraisals will be reviewed and periodically updated.

38.11a--Effective Date of Permit Fee System Based on Site-Specific

Appraisal. If applicable, the determination of permit fees by site-

specific appraisal becomes effective on the first day of the holder's

business year immediately following implementation of this system and

appraisal of the holder's use of National Forest System land.

38.11b--Amendment of Existing Ski Area Permits. Amend ski area term

special use permits issued under the National Forest Ski Area Permit

Act by replacing the former Clause VI in the permits with the current

Clause VI as it appears in Form FS-2700-5b and section 53.1, Clause A-

19, of this Handbook. When amending ski area term special use permits

that were not issued under the National Forest Ski Area Permit Act

(sec. 38.12c), replace the current permit fee clause in the permits

with Clause VI as it appears in Form FS-2700-5b and section 53.1,

Clause A-19, of this Handbook.

38.12--Ski Area Permits Not Issued Under National Forest Ski Area

Permit Act.

38.12a--Graduated Rate Fee System. Determine permit fees under GRFS

(FSM 2715.11) for any ski areas whose permits are not issued under the

National Forest Ski Area Permit Act and whose annual permit fees were

determined under GRFS prior to [date when the system based on site-

specific appraisal was implemented], unless the holders elect to have

their permits amended (sec. 38.12c).

38.12b--Flat Rate. Determine permit fees by a flat rate (FSM

2715.14) for any ski areas whose permits are not issued under the

National Forest Ski Area Permit Act and whose annual permit fees were

determined by a flat rate prior to [date when the system based on site-

specific appraisal was implemented], unless the holders elect to have

their permits amended (sec. 38.12c).

38.12c--Site-Specific Appraisal. Determine permit fees by site-

specific appraisal for ski areas whose permits are not issued under the

National Forest Ski Area Permit Act when:

1. Holders agree to have permit fees determined in this manner; or

2. Holders elect to have their permits amended for any other

purpose. The authorized officer shall give preference to issuing a new

permit under the National Forest Ski Area Permit Act.

These permit fees apply to all activities associated with the use

and occupancy authorized by the corresponding ski area permits,

including nordic and alpine skiing, outfitting and guiding, and

recreation events. Appraisals will be reviewed and periodically

updated.

38.2--Permit Fees for New Ski Area Permits.

1. Issue all new ski area permits under the National Forest Ski

Area Permit Act.

2. Use Form FS-2700-5b, Ski Area Term Special Use Permit, which

requires permit fees to be determined by site-specific appraisal.

Appraisals will be reviewed and periodically updated.

38.3--Billing. Require holders to pay their annual permit fees on

the first day of their business year for that year's use and occupancy

of National Forest System lands according to the following:

1. If the annual fee is $10,000 or less per year, payment is due in

full on the first day of the holder's business year. Bill holders 30

days in advance of the first day of their business year.

2. If the annual fee exceeds $10,000, holders may pay quarterly,

with 25 percent of the annual fee due on the first day of each quarter

of the holder's business year. Bill holders 30 days in advance of the

first day of each quarter.

Chapter 50--Terms and Conditions

53.1--A--Fees and Payments.

19. Clause for Ski Area Permit Fees Based on Site-Specific

Appraisal. See sections 38.11b and 38.2 of this Handbook for direction

on use of this clause.

VI. PERMIT FEES

A. Determination of Permit Fees by Site-Specific Appraisal. The

holder shall pay fair market value, as determined by site-specific

appraisal performed by a Forest Service contractor, agent, employee, or

other representative, for the use and occupancy of National Forest

System lands authorized by this permit. These appraisals shall be

performed in accordance with the latest editions of the ``Uniform

Standards of Professional Appraisal Practice,'' published by the

Appraisal Foundation, and the ``Uniform Appraisal Standards for Federal

Land Acquisitions,'' published by the Interagency Land Acquisition

Conference. In case of a conflict between these two standards, the

latter shall take precedence.

B. Access to Records.

1. For the purpose of administering this permit, including

performing or updating a site-specific appraisal of the use and

occupancy authorized by this permit to determine the permit fee, the

holder shall make all of the accounting books and supporting records

for the business activities conducted under this permit (including any

documentation relating to the past or future sale of the improvements

authorized by this permit), as well as those of sublessees and

franchises operating under the authority of this permit, available for

analysis by contractors, agents, employees, or other representatives of

the Forest Service or Federal agencies authorized to review Forest

Service activities.

2. Review of accounting books and supporting records shall be

performed on dates convenient to the holder and reviewers.

3. Financial information obtained under this clause shall be

treated as confidential to the extent authorized by law.

4. The holder shall retain and keep available for review accounting

books and supporting records for the business activities conducted

under this permit for 5 year after they are created, unless this

requirement is waived by the authorized officer in writing.

c. Corrections in Fee Determinations. Any errors in fee

determinations shall

[[Page 36104]]

be corrected retroactively, and a bill showing the correct permit fee

shall be sent to the holder for the period covered by the original

bill. Errors in fee determinations include but are not limited to those

based on misrepresentation of amounts, arithmetic or typographical

mistakes, or variation from generally accepted accounting principles,

the ``Uniform Standards of Professional Appraisal Practice,'' or the

``Uniform Appraisal Standards for Federal Land Acquisitions.'' Any

changes in fee determinations resulting from amendment or replacement

of the ski area permit fee system shall be made prospectively.

D. Updating of Appraisals. As needed, the Forest Service may update

the site-specific appraisals used to establish the permit fee under

Clause VI. If a new permit fee is determined by an updated site-

specific appraisal, the new permit fee shall become effective on the

first day of the holder's business year immediately following the date

of the Forest Service review appraisal report on the updated appraisal

report.

E. Permit Fee Payments. Permit fee payments shall be due within 30

days of receipt of a bill and shall be submitted to the Collection

Officer, United States Department of Agriculture, Forest Service, at

the address provided by the authorized officer. Checks or money orders

shall be made payable to the United States Department of Agriculture,

Forest Service.

F. Interest and Penalties.

1. Under 31 U.S.C. 3717 and 7 CFR Part 3, Subpart B, or subsequent

changes to those authorities, interest shall be charged on any permit

fee payment that is not received on the date it is due.

2. Interest shall be assessed using the higher of (1) The most

current rate prescribed by the United States Department of the Treasury

Financial Manual (TFM-6-8025.40) or (2) the prompt payment rate

prescribed by the United States Department of the Treasury under

Section 12 of the Contract Disputes Act (41 U.S.C. 611). Interest shall

accrue from the date the permit fee payment is due.

3. Administrative charges may be assessed to cover processing and

handling of delinquent permit fee payments.

4. A penalty of 6 percent per year shall be assessed on any permit

fee payment that is more than 90 days overdue and shall accrue from the

date the fee payment is due. This penalty is in addition to any

interest and other charges assessed under Clauses VI.F.1-3.

5. Delinquent permit fee payments, interest, penalties, and any

other charges assessed under Clause VI.F shall be subject to all the

rights and remedies afforded the United States under federal law and

implementing regulations (31 U.S.C. 3711 et seq.).

G. Consequences of Nonpayment. The holder's failure to make timely

payment of any permit fees, interest, penalties, or other charges

assessed under Clause VI.F shall be grounds for revocation of this

permit. This permit terminates when any payments owed under Clause VI

are more than 90 days overdue.

H. Accounting Records. The holder shall follow generally accepted

accounting principles or other comprehensive bases of accounting

acceptable to the Forest Service in recording financial transactions

and in reporting results to the authorized officer. When requested by

the authorized officer, the holder at its expense shall have its annual

accounting reports audited or prepared by a licensed independent

accountant acceptable to the Forest Service. When requested by the

authorized officer, the holder at its expense shall prepare and

maintain any special records and accounts that may be specified by the

authorized officer. The holder shall require sublessees and franchises

to comply with these same requirements.

I. Financial Statements. Within 3 months of the last day of the

holder's business year, the holder shall provide financial statements

representing the holder's financial condition as of the last day of the

holder's business year and the results of the holder's operation for

that year. When requested by the authorized officer, the holder shall

require sublessees to comply with this requirement.

J. Replacement of Permit Fee System. The system requiring ski area

permit fees to be determined by site-specific appraisal may be replaced

in its entirety by the Chief of the Forest Service with a new permit

fee system if it applies to all holders of permits issued under the

National Forest Ski Area Permit Act. The new permit fee system shall

become effective on the first day of the holder's business year

immediately following implementation of the new system.

[FR Doc. 95-17131 Filed 7-12-95; 8:45 am]

BILLING CODE 3410-11-M