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CUFFA: Preserving Your Rights Jeff Eckland Mark Blando

CUFFA: Preserving Your Rights Jeff Eckland Mark Blando . Eckland & Blando LLP 800 Lumber Exchange Building 10 South Fifth Street Minneapolis, Minnesota 55402. Agenda. CUFFA Analysis Appeal Process Appeal Experiences Litigation.

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CUFFA: Preserving Your Rights Jeff Eckland Mark Blando

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  1. CUFFA:Preserving Your RightsJeff EcklandMark Blando • Eckland & Blando LLP • 800 Lumber Exchange Building • 10 South Fifth Street • Minneapolis, Minnesota 55402

  2. Agenda • CUFFA Analysis • Appeal Process • Appeal Experiences • Litigation Midwestern Values, D.C. Connections EcklandBlando.com

  3. Midwestern Values, D.C. Connections EcklandBlando.com Franconia Associates v. United States, 536 U.S. 129 (2002).

  4. This is what we are fighting for.

  5. CUFFA U.S. Forest Service claims that the lot appraisals – which set the annual fees – cannot consider key regulatory restrictions. USFS claims that taking 5% of the market value accounts for the impact of USFS regulation on market value

  6. CUFFA Problem is not the statute (CUFFA) Problem is getting the US Forest Service to actually follow the statute

  7. CUFFA Problem is not the statute (CUFFA) Problem is getting the US Forest Service to actually follow the statute . . . . by having a Federal Judge tell them to do it

  8. Purpose of CUFFA(actual text of the law) “…to develop and implement a more consistent procedure for determining cabin user fees, taking into consideration the limitations of an authorization and other relevant market factors.” 16 U.S.C. § 6202

  9. Appraisal Requirements CUFFA requires an appraisal every ten years to set a fee based on the fair market value of the use of the Forest lot. CUFFA has a long, detailed section describing how the appraisal should be conducted. 16 U.S.C. § 6205

  10. Appraisal Requirements CUFFA requires (16 U.S.C. § 6205) an appraiser to consider “typical value influences” such as – Access restrictions “imposed by agency” Whether site conditions comply with Regs “Any other typical value influences described in standard appraisal literature.”

  11. Appraisal Requirements The appraisal must comply with the requirements of standard appraisal literature, specifically (See 16 USC 6205(a)(7)), - Uniform Standards of Professional Appraisal Practice (USPAP) - Uniform Appraisal Standards for Federal Land Acquisitions (UASFLA)

  12. Appraisal Requirements - UASFLA “Market Value is to be considered at the time of valuation considering the property in its condition and situation at the time; if at that time, the property was subject to zoning restrictions, that factor must be considered in evaluating the property.” USFLA, B-23, p. 66. “In addition to zoning, the appraiser must consider the impact of other land use regulations on the utility and value of the property being appraised….[some examples are:] Wetland regulations, endangered species protection, timber harvesting regulations, development moratoria… USFLA, D-6, p. 84.

  13. Appraisal Requirements - USPAP USPAP Rule 1-2(e): An appraiser must identify the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal, including: … (iv) any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of a similar nature… To determine market value, “an appraiser must identify and analyze the effect on use and value of existing land use restrictions…”. USPAP, Rule 1-3(a).

  14. Restrictions The Right to Exclude: • “One of the most essential sticks in the bundle of rights that are commonly characterized as property.” Kaiser Aetna v. United States, 444 U.S. 164 (1979) • The “essence of all property is the right to exclude.” In re Etter, 756 F.2d 852 • “The right to sole and exclusive possession – the right to exclude strangers, or for that matter friends, but especially the Government” is “fundamental to our theory of social organization.” Hendler v. United States, 952 F.2d 1364 (Fed. Cir. 1991)

  15. Restrictions The Right to Transfer: • Hodel v. Irving, 481 U.S. 704 (1987); United States v. General Motors Corp., 323 U.S. 373 (1945) • Potential 2-year, 10-year, and 20-year limitations on term of use.

  16. U.S. Forest Service Argument CUFFA interpretation from FS Executive Summary • Section 606 does not address restrictions • “Fee Simple Estate” - supposedly doesn’t cover restrictions • Section 607: 5% of appraisal covers impact of regulations

  17. The Government reasoning does not hold water

  18. U.S. Forest Service Argument Section 606 does address restrictions. Appraiser must consider: access “restrictions imposed by the agency.” whether any site improvements or conditions implicate regulatory compliance issues “presence of marketable timber” (because FS regulations prevent harvesting)

  19. U.S. Forest Service Argument Section 606 details appraisal process Requires appraiser to consider the factors noted above, at a minimum, AND “any other typical value influences described in standard appraisal literature.” In the standard appraisal literature, specifically USPAP, all factors that affect market value must be considered. See USPAP, Competency Rule.

  20. U.S. Forest Service Argument “Holding a fee simple does not of course mean that holders enjoy wholly unfettered dominion over the land.” Fundamentals of Property Law, Burke, Burkhart, and Helmholz, 1999. Tahoe-Sierra Preservation Council, 535 US 302 (2002): describes a “fee simple” estate on Lake Tahoe that is subject to a building regulations that prevent construction on land for over two years.

  21. U.S. Forest Service Argument FS states that 5% of the Appraisal is supposed to account for the negative effect of government regulations. This interpretation has not been supported by the FS, but instead relies on misplaced grammar.

  22. § 606: “Cabin User Fee” The Secretary shall establish the cabin user fee as the amount that is equal to 5 percent of the market value of the lot, as determined in accordance with section 6205, reflecting an adjustment to the typical market rate of return due to restrictions imposed by the permit, including— (1) the limited term of the authorization; (2) the absence of significant property rights normally attached to fee simple ownership; and (3) the public right of access to, and use of, any open portion of the lot on which the cabin or other enclosed improvements are not located.

  23. § 606: “Cabin User Fee” The Secretary shall establish the cabin user feeas the amount that is equal to 5 percent of the MARKET VALUE OF THE LOT, as determined in accordance with section 6205, reflecting an adjustment to the typical MARKET RATE of return due to RESTRICTIONS imposed by the permit, including— (1) the limited term of the authorization; (2) the absence of significant property rights normally attached to fee simple ownership; and (3) the public right of access to, and use of, any open portion of the lot on which the cabin or other enclosed improvements are not located.

  24. U.S. Forest Service Argument Legislative History Sen. Craig (sponsor of CUFFA) analyzed the fee calculation in the Congressional Record: “This calculation reflects restrictions imposed by the permit…” “Calculation” means “the result of an act of calculating” not a particular piece of the formula. Merriam Webster Dictionary

  25. Legislative History The history behind CUFFA strongly supports the cabin owner interpretation.

  26. Statements made by Bill Sponsor Sen. Craig on the Senate Floor • My goal is to see that the cabin program remains affordable for American families. (145 Cong. Rec. S14967, Nov. 17, 1999) • There are more than 15,000 families out there who fear that the long tradition of cabin-based forest recreation is nearing an end because the agency’s fee mechanism has made the program unaffordable for all but the very wealthy. Id. • At the Pettit Lake tract in Idaho’s Sawtooth National Recreation Area, the new base fees skyrocketed into alarming five-digit amounts—so high that a single annual fee was nearly enough money to buy raw land outside the forest and construct a cabin. (146 Cong. Rec. S8409, Sept. 12, 2000)

  27. Statements made by Bill Sponsor Congressman Nethercutt • A dramatic and rapid fee increase diminishes the family atmosphere of the areas. Public lands exist for the enjoyment of a broad spectrum of Americans and dramatic fee increases hurt this objective. (145 Cong. Rec. E2372, Nov. 11, 1999) • [T]he appraisal methodology currently used by the Forest Service is not arriving at the appropriate value of the use of a lot by a cabin owner. Federal property differs from private land in that the owners do not maintain the same rights and privileges to their property as those held by private land owners. For example, permit holders cannot make modifications to the land or their cabin without the approval of the Forest Service, they cannot reside in their cabin on a year round basis and they cannot deny others access to the land on which the cabin is built. These factors should be taken into consideration in the appraisal process. Id. (emphasis added)

  28. Statements of Congressman Nethercutt, con’t • We do not want, I do not believe, to have people priced out of the markets so that we only have millionaires or people of means who are able to use these Forest Service lands. And so with an enhanced appraisal process that results in the Forest Service . . . looking at bottom lines and as a source of income rather than considering the value to families to have—and moderate income families to have a place to go in the summer and to enjoy the outdoors, I think we are misplacing our priorities as a Federal Government. (At Hearing before the Subcommittee on Forests and Forest Health of the Committee on Resources, March 23, 2000)

  29. Congresswoman Chenoweth-Hage [T]he truth of the matter is that the majority of cabin owners are either retired or middle class working families. The incomes of these citizens do not allow for the excessive fee increases that the Forest Service is proposing. The result of the substantially higher fees will be to force out many middle-class cabin owners, allowing only the wealthiest of Americans to enjoy these recreational opportunities. I do not think that is what any of us want. (March 23, 2000 committee hearing) The Forest Service wants to compare these cabins to privately-owned residences, but this obtains a false appraisal since the cabins are not on private property and not subject to the same constitutionally guaranteed rights we enjoy with private property. Id.

  30. Legislative Testimony • The Forest Service opposed the passage of CUFFA because it believed it would lose revenue if the legislation passed. (Statement of Paul Brouha, Associate Deputy Chief of the National Forest System, Senate Committee Hearing March 22, 2000, pg. 5). • Mr. Brouha explained that prior to CUFFA, the forest service calculated fees by appraising market value, then multiplying by 5%. Id. at 7.

  31. Legislative Testimony • Numerous leaders of cabin owner associations spoke in favor of passage of CUFFA, e.g.: • “This bill will provide relief to some 15,000-cabin owners in 25 states and Puerto Rico who mostly, suddenly face alarming and increasingly high fee permits.” David Mead, President, Sawtooth Forest Cabin Owners’ Assoc., Twin Falls, Idaho before Senate Hearing, Mar. 22, 2000, pg 12. • “The bill before us today is intended to remedy the errors we see [in the appraisal process]. . . . It is aimed at producing reasonable and fair fees for cabin use. Mary Clarke Ver Hoef, Chair, National Forest Homeowners Government Liaison Committee before Senate Hearing, March 22, 2000, pg. 14. (Mary is the current Executive Director of NFH)

  32. Keep an eye on the summit while walking the trail

  33. Two Appeal Routes 1. Appeal to Agency (i.e., challenge application of CUFFA), or 2. Get a second, accurate appraisal (i.e., challenge the underlying facts, description of your tract’s appraised lot)

  34. Option 1: Agency Appeal The Forest Service grants appeal rights when the permit holder actually has to pay the new, CUFFA-based fees Then must appeal within 45 days of the fee invoice. * The notice of the new fee does not start the 45-day clock. Only when you actually have to pay the new fee.

  35. Option 1: Agency Appeal • Make sure to include a legal challenge to CUFFA – even though the FS will likely reject it out of hand. • Take it to the Second Level • Exhaustion Requirement

  36. Option 2: Getting a second appraisal Notify the Forest Service of your intent to obtain a second appraisal within 60 days of receiving fee notice. • This also protects your rights, and will result in an appeal as well. • Gives you a year to get a correct appraisal done

  37. Option 2: Getting a second appraisal Submit name of proposed 2nd Appraiser • Cabin Owner appraisers 1. Meet same state certifications as 1st appraiser 2. Have experience appraising vacant recreational land 3. Have similar qualifications as 1st appraiser 4. Be approved in advance by FS • Second appraiser will have to abide by the same rules as the FS Appraiser!

  38. TIMELINEOption 1: Agency Appeal (Administrative Review) DAY 0 Receive invoice for CUFFA-based annual permit fee 45 File notice of appeal with Forest Supervisor w/in 45 days Also inform Deciding Officer of notice of appeal 75 30 days to respond (36 CFR § 251.94(b)) 90 Appeal to Regional Forester within 15 days after decision on first appeal 120 30 days to respond (36 CFR § 251.94(b)) Decision of Regional Forester on second-level appeal is final. 36 CFR § 251.87(e)(3)

  39. TIMELINEOption 2: Second Appraisal DAY 0 Receipt of Notice of Determination (NOD) of new base cabin user fee  • Notify FS of intent to obtain a second appraisal (“Not later than 60 days”) • “Obtain a second appraisal” (“Within 1 year following receipt” of NOD) • Submit “request for reconsideration of the base cabin user fee, based upon results of the second appraisal” (“Not later than 60 days after obtaining second appraisal”) 484 FS shall review and notify cabin owner of the new base cabin user fee (“Not later than 60 days after request for reconsideration”)

  40. TIMELINEOption 2: Second Appraisal DAY 529 File notice of appeal with Forest Supervisor w/in 45 days Also inform Deciding Officer of notice of appeal 559 30 days to respond (36 CFR § 251.94(b)) 574 Appeal to Regional Forester within 15 days after decision on first appeal 604 30 days to respond (36 CFR § 251.94(b)) Decision of Regional Forester on second-level appeal is final. 36 CFR § 251.87(e)(3)

  41. Appeal War Stories • Chippewa NF, Minnesota • 55 Permit Holders • Fees: from $1900 to $6,300. • Grand Island in Hiawatha NF, Michigan • 12 Permit Holders • Fees: from $500-$600 to $7,500-$13,000 • Key considerations: • The “Administrative Record” • Oral Presentation

  42. The Road to a Remedy May Be Long, but it’s Worth the Trip.

  43. What If the Administrative Appeals Don’t Work? Upon exhaustion of the administrative remedies, cabin owners may pursue a claim in Federal District Court under the Administrative Procedure Act (APA). 5 USC § 704. Standing: You will have been adversely affected by an agency action – the failure to determine the appropriate annual fee in accord with CUFFA – and can ask the Federal Courts to correct it.

  44. Judicial Review APA Concepts: Six Year Statute of Limitations Court will review the “Agency Record.” Discovery will be limited, if allowed at all. (Highlights importance of making record of administrative appeal complete.) Deference

  45. Judicial Review Grounds (APA § 706(2)(A)): - Arbitrary and Capricious - An Abuse of Discretion - Not in accordance with the law Claim does not seek money damages, only that the Forest Service properly apply the law (which will lead to appropriate annual fees)

  46. Judicial Review Claims: • Interpretation of CUFFA • Less Deference to Agency • Appraisal Issues • But moot if win on CUFFA • Defective Appeal Process • Lack of independence/impartiality • Inadequate hearing

  47. When we are done, we can get back to enjoying our cabins

  48. Questions? For further information: Jeff Eckland (612) 236-0161 jeckland@ecklandblando.com Mark Blando (612) 236-0162 mblando@ecklandblando.com

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