This is the accessible text file for GAO report number GAO-02-278R 
entitled 'Land Acquisitions: Agencies Generally Used Similar Standards 
and Appraisal Methodologies in CALFED and CVPIA Transactions' which 
was released on January 23, 2002. 

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the 
printed version. The portable document format (PDF) file is an exact 
electronic replica of the printed version. We welcome your feedback. 
Please E-mail your comments regarding the contents or accessibility 
features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

GAO-02-278R: 

United States General Accounting Office: 
Washington, DC 20548: 

January 23, 2002: 

The Honorable Doug Ose: 
House of Representatives: 

Subject: Land Acquisitions: Agencies Generally Used Similar Standards 
and Appraisal Methodologies in CALFED and CVPIA Transactions: 

Dear Mr. Ose: 

Since 1994, over $63.6 million of CALFED Delta-Bay (CALFED) and 
Central Valley Project Improvement Act (CVPIA) funds have been used to 
purchase private lands in California for wetlands mitigation and 
wildlife enhancement. Using these funds, several federal agencies and 
nonprofit organizations have acquired about 101,800 acres-—94,300 
acres in full ownership and 7,500 acres in partial interest or 
easements that restrict how land may be used. 

Concerned about the potential effect that multiple purchasing agencies 
could have on land prices, you asked us to provide information on the 
land appraisal processes used in such acquisitions. Specifically, you 
asked us to determine (1) what appraisal standards and guidance 
federal and nonfederal entities used in CALFED and CVPIA funded land 
acquisitions, and (2) if different standards or guidance were used, 
the rationale for their use and whether their use raised any 
significant concerns regarding compliance with appraisal standards. 

To obtain information on the appraisal standards and guidance being 
used in these acquisitions and whether any differences in standards or 
guidance raised significant concerns about the appraisals, we examined 
the activities of three federal agencies and one of the nonprofit 
organizations that used such funds to acquire full ownership or 
easements—the Fish and Wildlife Service and the Bureau of Reclamation, 
in the Department of the Interior, Natural Resources Conservation 
Service (NRCS) in the Department of Agriculture and The Nature 
Conservancy, a nonprofit organization. In addition, to determine if 
federal agencies and nonprofit organizations were adhering to their 
respective standards and guidance, we reviewed 6 of 47 transactions 
completed during fiscal years 1994 to 2001 that fell within the 
geographic area of your concern-—the Central Valley of California 
(from Fresno to Redding and from San Francisco Bay to Sacramento). We 
selected these transactions to include one from each of the agencies 
and the nonprofit and to cover both CALFED and CVPIA funding sources. 

In summary, the three federal agencies and the nonprofit organization 
we reviewed used the Uniform Appraisal Standards for Federal Land 
Acquisitions (Uniform Standards) when conducting appraisals for land 
acquisitions. The Uniform Standards, prepared by the Interagency Land 
Acquisition Conference, set forth the general principles applicable to 
the appraisal of property for federal land acquisition. In addition, 
all the entities developed and used supplemental appraisal guidance, 
which was generally consistent across the entities. 

In conducting their appraisals, the federal agencies and the nonprofit 
organization used similar methodologies with one exception involving 
an NRCS easement acquisition. In assessing the value of an easement, 
the Uniform Standards specify that full consideration should be given 
to the residual value of the property—that is the value of the rights 
retained by the owner after the easement restriction is implemented. 
As a routine practice, NRCS does not consider the land’s residual 
value in making its appraisals. Consistent with this practice, in the 
case we examined, NRCS appraised the land at $4,000 an acre and made 
no reduction for any residual use. In explaining the rationale for 
this practice, NRCS officials said that the agency’s floodplain 
program is aimed at reducing farmland acreage for which federal flood 
disaster payments are made by purchasing easements precluding 
continued farming. Such an easement thereby eliminates any residual 
value associated with agricultural use of the land. According to NRCS 
officials, considering the land’s residual value associated with any 
nonagricultural use of the land might reduce the compensation to 
landowners and discourage interest in the program. In addition, NRCS 
limits payments to a maximum of $2,000 per acre and all of NRCS’s 
easement acquisitions are voluntary since NRCS does not have eminent 
domain authority—that is, the right of the government to condemn the 
land and take possession from an unwilling seller. Officials at other 
agencies were concerned about NRCS’s practice of not considering the 
land’s residual value because such practice might result in a higher 
appraisal valuation. However, because the appraiser did not determine 
the land’s residual value in the case we examined, we could not assess 
the impact of NRCS’s practice. The landowner in this case ultimately 
received the full-appraised value of $4,000 per acre for the easement; 
NRCS paid $2,000 per acre from its own funds and CALFED funds were 
used to make up the $2,000 difference. 

Background: 

In California, land acquisitions for enhancing habitat and protecting 
wildlife are funded through a variety of federal programs including 
CALFED and the Central Valley Project Improvement Act. CALFED is a 
joint federal-state partnership with management and regulatory 
responsibilities in the San Francisco Bay/Sacramento-San Joaquin River 
Delta, known as the Bay-Delta area. CALFED was established in 1995 to 
develop a long-term plan for restoring the ecological health of, and 
improving water management in, the area. Land acquisitions are one of 
the means used to accomplish this goal. In 1996, the California Bay-
Delta Environmental Enhancement and Water Security Act, known as the 
Bay-Delta Act, authorized the appropriation of federal funds in fiscal 
years 1998 through 2000 for developing and implementing CALFED’s 
authorized activities.[Footnote 1] Funds were appropriated to the 
Bureau of Reclamation, which distributed them to participating 
entities. The initial authorization and funding for the Bay-Delta 
Ecosystem expired in the fall of 2000. Reauthorization legislation for 
CALFED is currently pending in Congress. 

The Central Valley Project Improvement Act of 1992 established a 
federally funded program that, among other things, authorizes 
restoration activities for wildlife habitats damaged as a result of 
water projects completed under the Central Valley Project.[Footnote 2] 
CVPIA funds may be used for habitat restoration and enhancement, and 
for water and land acquisitions from willing sellers. CVPIA projects 
are financed in part through the Central Valley Project Restoration 
Fund and in part through donations and payments from the Central 
Valley Project water and power users. 

In total, over $63.6 million of CALFED/CVPIA funds, sometimes combined 
with other federal funds, has been used to acquire full ownership or 
easements for 101,804 acres in Northern California and the Central 
Valley, as shown in table 1. Enclosure I provides additional 
information on the project, cost, and type of acquisition by federal 
agency and nonprofit organization. 

Table 1: Acres Acquired in Northern California and the Central Valley 
Using CALFED or CVPIA funds: 

Full ownership acres acquired: 
CALFED[A]: 13,513; 
CVPIA: 80,764. 

Easement acres acquired: 
CALFED[A]: 2,880; 
CVPIA: 4,647. 

Total purchase price: 
CALFED[A]: $44,556,471; 
CVPIA: $19,060,786. 

[A] Approximately $5,748,500 of CALFED funds have been committed to 
buy (full ownership or easement) about 2,611 acres, but the 
transactions have not yet been completed, thus are excluded from the 
table. 

Source: GAO’s analysis of data provided by CALFED and federal agencies. 

[End of table] 

NRCS used a combination of its own and CALFED funds to acquire some 
easements under its Emergency Watershed Protection (EWP) program, 
which allows for the purchase of floodplain easements as an emergency 
measure. Under the floodplain easement option, a landowner voluntarily 
offers to sell to NRCS a permanent conservation easement that provides 
the NRCS with the full authority to restore and enhance the floodplain’
s functions and values. NRCS may purchase EWP easements on any 
floodplain lands that have been impaired within the last 12 months or 
that have a history of repeated flooding—that is, flooding at least 
two times during the past 10 years. Purchases are based upon 
established priorities. 

Appraisals are used to estimate the market value of and serve as the 
basis for negotiating land acquisitions. Market value is defined in 
the Uniform Standards as the amount for which a property would be sold 
by a willing and knowledgeable seller, with no obligation to sell, to 
a willing and knowledgeable buyer, with no obligation to buy. The 
appraiser estimates the value of the land based on its “highest and best
” use, as if vacant and available for such use. Under the Uniform 
Standards, in making an appraisal for an easement acquisition, the 
appropriate compensation is the difference between the value of the 
whole parcel before the acquisition and the residual value of the 
remainder after the acquisition. This appraisal method is also 
referred to as the “before and after” method of valuation. Appraisals 
can be conducted by qualified federal agency staff or by private 
appraisal firms, called contract appraisers. A qualified reviewing 
appraiser must review all appraisals irrespective of whether federal 
agency staff or contract appraisers completed them. 

Appraisal Standards and Guidance Used by Federal Agencies: 

In conducting appraisals and appraisal reviews for CALFED and CVPIA 
transactions, federal agencies and the nonprofit organization used the 
Uniform Standards. These standards, which are compatible with industry 
standards and practices, establish policies that federal agencies must 
follow to the greatest extent practicable in acquiring real property. 
They address all facets of the acquisition including purpose and scope 
of the appraisal, legal description of the property, current land use, 
and detailed data analysis that includes the appraiser’s determination 
of highest and best use and method of valuation, such as comparable 
sales in the area. In addition, the Uniform Standards also describe a 
format for preparing the written appraisal and the documentation that 
is needed. In each of the six transactions we reviewed, the written 
appraisal included detailed information on the parcel of land under 
consideration and the data used to estimate its value. For example, in 
one transaction a Bureau of Reclamation appraisal determined that the 
land value would be higher if the land were used differently. The 
appraiser concluded that the current use-—cattle grazing-—did not 
represent the highest and best use of the land. The appraisal included 
the appraiser’s detailed analysis of current and potential uses, an 
examination of zoning laws and general use plans, and recent sales in 
the area showing that the area was in transition from cattle grazing 
to residential development—-a higher economic use. 

Moreover, all of the acquisitions we reviewed used comparable sales to 
determine the land valuation. Comparable sales are defined as recent 
sales of parcels in the general area of the parcel under consideration 
that are viewed to be similar. In each case, a detailed description of 
the sale used for comparison was provided including an overall 
statement regarding the degree of applicability—whether the sale 
parcel was inferior, comparable, or superior to the subject parcel. 
The number of comparable sales analyzed in the six transactions we 
reviewed ranged from 6 to 26 sales. The price the federal agencies and 
the nonprofit entity paid in each of the six cases was below the 
highest comparable sale analyzed. 

Agency guidance supplements the Uniform Standards and provides more 
detailed procedures for conducting appraisals and appraisal reviews. 
The U.S. Fish and Wildlife Service’s manual has two chapters dedicated 
to the appraisal and the appraisal review. The Bureau of Reclamation’s 
Directives and Standards on Real Estate Appraisals details agency 
specific procedures and processes and includes multiple appendices 
describing authorities and the acquisition process. NRCS has a 
National Wetlands Reserve Program Handbook with sections detailing 
procedures for wetlands and floodplain easement acquisitions. The 
Nature Conservancy also developed supplemental guidance for use in 
conducting appraisals. In each case, the guidance sections relating to 
acquisitions were comprehensive and generally consistent with the 
Uniform Standards. In addition, all entities had developed guidance 
for selecting contract appraisers that included specific instructions 
to the contract appraisal firm. 

Agencies and Nonprofit Organization Used Similar Appraisal 
Methodologies with One Exception: 

The federal agencies and the nonprofit organization generally used the 
same methodologies for appraisals with one exception involving an 
easement acquired by NRCS. In assessing the value of an easement, the 
Uniform Standards specify that consideration should be given to the 
residual value of rights that the owner retains after the easement 
restriction has been implemented. The nonprofit organization and the 
federal agencies, except for NRCS, take into account residual value. 
For example, a wetlands easement purchased by the Fish and Wildlife 
Service allowed for occasional recreational use. The price paid for 
the easement was adjusted for the residual value of the land with 
recreational use. NRCS, as a routine practice, does not consider the 
land’s residual value in making appraisals and in the NRCS transaction 
we reviewed, NRCS made no reduction for any residual use. 

NRCS officials explained that their floodplain program is aimed at 
reducing farmland acreage that receives federal disaster payments due 
to frequent flooding. This reduction is accomplished by purchasing 
easements that preclude agricultural use of floodplain acreage. In 
NRCS’s view, restricting the appraisal value to the market value of 
the land’s agricultural use and precluding such use eliminates any 
agriculture-related residual value. Further, NRCS officials stated 
that their easements severely restrict future activities or uses of 
the land and the landowner must seek NRCS’s approval for almost any 
activity. Finally, NRCS does not have eminent domain authority making 
all transactions voluntary and NRCS limits payments from its funds to 
the lesser of (1) the land’s agriculture value based on a market 
appraisal analysis, (2) the landowner’s offer, or (3) a pre-
established geographical area rate not to exceed $2,000 per acre. The 
geographical area rate, which varies throughout the Central Valley and 
Northern California, is based on such factors as soil erodability, and 
crop and production histories. 

According to NRCS officials, buying agriculture easements on 
floodplain acres benefits the federal government in that payments for 
flood losses on those lands cease. In their view, given that the 
program already has limits on compensation, further reducing the 
compensation by considering residual values other than farming would, 
in their opinion, discourage farmers from participating in the program. 

Officials at other agencies were concerned, however, that the Uniform 
Standards were not being uniformly followed and that NRCS’s practice 
might result in higher valuations for easements than if 
nonagricultural residual values were considered. Because residual 
value was not determined in the NRCS appraisal we examined, we could 
not assess the impact of NRCS’s practice. The landowner, in this case, 
received the full appraised value of $4,000 per acre for the easement; 
NRCS paid $2,000 per acre from its own funds and CALFED funds were 
used to pay the remaining $2,000 per acre. 

Observations: 

In acquiring easements through the CALFED program, NRCS takes a 
different appraisal approach than the other agencies we examined. 
Instead of taking residual uses of the land into account in 
determining the value of the easement, NRCS essentially assumes that 
the lands only use is agricultural. Under this approach, by purchasing 
an easement barring future agricultural use of the land there is no 
residual value to deduct. As a result, the appraised values of the 
easements may be higher than they would be otherwise. 

NRCS makes the case that its approach, nonetheless, makes financial 
sense. It argues that removing land in floodplains that is subject to 
repeated disaster payments reduces federal costs in the long run. 
Considering the non-agricultural residual value could reduce the 
incentive for farmers to participate in the floodplain program. 

While NRCS’s view has a potentially sound conceptual grounding, it has 
not produced a financial analysis to support its view and other 
agencies are not convinced that the NRCS approach is financially 
sound. It may be worthwhile for NRCS to re-examine its approach and 
perform the financial analyses to support its position. 

We provided the Departments of the Interior and Agriculture and The 
Nature Conservancy with a draft of this letter for their review and 
comment. All three entities generally agreed with the substance of the 
letter. Interior and Agriculture officials also provided technical and 
clarifying comments that we have incorporated as appropriate. 

We conducted our review from June 2001 to November 2001 in accordance 
with generally accepted government auditing standards. 

This letter will be available on GAO’s home page at [hyperlink, 
http://www.gao.gov]. Please contact me at (202) 512-3841 or Keith 
Oleson at (415) 904-2218 if you or your staff has any questions. Other 
major contributors to this report were Judy Hoovler and Ben Atwater. 

Sincerely yours, 

Signed by: 

Barry T. Hill: 
Director, Natural Resources And Environment: 

Enclosure: 

[End of section] 

Enclosure I: Information on CALFED and CVPIA Land Acquisitions in 
California 

The following tables present information on CALFED and Central Valley 
Project Improvement Act (CVPIA) land acquisitions occurring within the 
Central Valley and Northern California from fiscal year 1994 to fiscal 
year 2001. 

Table 2: CALFED Funded Acquisitions by Purchaser, Funded Amount, and 
Acreage: 

Purchaser and project: Fish and Wildlife Service; 

Property A[B]: 
Funds[A]: $8,926,000; 
Full-ownership acres: 4,760. 

Property B: 
Funds[A]: $2,622,500; 
Full-ownership acres: 555. 

Property C: 
Funds[A]: $491,000; 
Easement acres: 162. 

Lower San Joaquin River: 
Funds[A]: $1,100,000; 
Full-ownership acres: 230. 

San Joaquin River: 
Funds[A]: $10,827,000; 
Full-ownership acres: 2,030. 

Fish and Wildlife Service: Subtotal; 
Funds[A]: $23,966,500; 
Full-ownership acres: 7,575. 

Purchaser and project: Nature Conservancy; 

Property D: 
Funds[A]: $5,356,000; 
Full-ownership acres: 1,655. 

Riparian Project: 
Funds[A]: $573,000; 
Full-ownership acres: 105. 

Cosumnes River 1: 
Funds[A]: $3,500,000; 
Full-ownership acres: 2,947. 

Cosumnes River 2: 
Funds[A]: $750,000; 
Full-ownership acres: 475. 

Nature Conservancy: Subtotal; 
Funds[A]: $10,179,000; 
Full-ownership acres: 5,182. 

Purchaser and project: Natural Resources Conservation Service; 

Property E: 
Funds[A]: $110,403; 
Easement acres: 57. 

Property F: 
Funds[A]: $30,300; 
Easement acres: 61. 

Property G: 
Funds[A]: $100,700; 
Easement acres: 201. 

Property H: 
Funds[A]: $10,690; 
Easement acres: 22. 

Property I: 
Funds[A]: $273,540; 
Easement acres: 153. 

Property J: 
Funds[A]: $222,400; 
Easement acres: 111. 

Property K: 
Funds[A]: $190,552; 
Easement acres: 203. 

Property L: 
Funds[A]: $226,314; 
Easement acres: 127. 

Property M: 
Funds[A]: $102,042; 
Easement acres: 58. 

Natural Resources Conservation Service: Subtotal[C];
Funds[A]: $1,366,941; 
Easement acres: 993. 

Purchaser and project: Other entities; 

California Department of Fish and Game: 
Funds[A]: $1,915,000; 
Full-ownership acres: 453 
Easement acres: 168. 

U.S. Bureau of Land Management: 
Funds[A]: $2,240,250; 
Easement acres: 1,411. 

East Stanislaus River Conservation District; Friends of the Tuolumne:
Funds[A]: $26,250; 
Easement acres: 140. 

Turlock Irrigation District: 
Funds[A]: $3,322,050; 
Easement acres: 6. 

Friends of the Tuolumne: 
Funds[A]: $1,540,480; 
Full-ownership acres: 303 

Other entities: Subtotal; 
Funds[A]: $9,044,030; 
Full-ownership acres: 756 
Easement acres: 1,725. 

Purchaser and project: Total; 
Funds[A]: $44,556,471; 
Full-ownership acres: 13,513 
Easement acres: 2,880. 

[A] In some instances, additional funds from sources other than CALFED 
were also used in the transaction. 

[B] Sales data were collected under individual property-owner names, 
which have been omitted here. 

[C] Includes overhead costs of $100,000 not identified by individual 
transactions. 

Source: GAO’s analysis of data provided by CALFED and federal agencies. 

[End of table] 

Table 3: CVPIA Funded Acquisitions by Purchaser, Funded Amount, and 
Acreage: 

Purchaser and project: U.S. Fish and Wildlife Service; 

Sacramento River: 
Funds[A]: $1,501,796; 
Full-ownership acres: 287. 

Sacramento River: 
Funds[A]: $162,000; 
Full-ownership acres: 122. 

San Joaquin River: 
Funds[A]: $176,900; 
Full-ownership acres: 35. 

Property 1A[B]: 
Funds[A]: $313,000; 
Full-ownership acres: 56. 

Property 2A: 
Funds[A]: $123,500; 
Full-ownership acres: 90. 

Property 3A: 
Funds[A]: $385,000; 
Easement acres: 465. 

Property 4A: 
Funds[A]: $136,952; 
Easement acres: 2. 

Property 5A: 
Funds[A]: $147,952; 
Easement acres: 6. 

Property 6A: 
Funds[A]: $249,036; 
Easement acres: 1,629. 

Property 7A: 
Funds[A]: $154,000; 
Full-ownership acres: 10. 

Property 8A: 
Funds[A]: $677,250; 
Easement acres: 137. 

Property 9A: 
Funds[A]: $180,600; 
Full-ownership acres: 482. 

Property 10A: 
Funds[A]: $1,290,000; 
Full-ownership acres: 4,176 
Easement acres: 180. 

Property 11A: 
Funds[A]: $286,000; 
Full-ownership acres: 13,000. 

Property 12A: 
Funds[A]: $400,000;
Full-ownership acres: 80. 

Property 13A: 
Funds[A]: $1,960,000; 
Full-ownership acres: 103. 

Property 14A: 
Funds[A]: $76,800; 
Easement acres: 19. 

Segment7/11 Property: 
Funds[A]: $605,000; 
Easement acres: 49. 

U.S. Fish and Wildlife Service: Subtotal; 
Funds[A]: $8,825,786; 
Full-ownership acres: 18,441 
Easement acres: 2,487. 

Purchaser and project: Bureau of Reclamation; 

Property 1B: 
Funds[A]: $2,823,000; 
Full-ownership acres: 1,227. 

Property 2B: 
Funds[A]: $1,719,000; 
Full-ownership acres: 60,030. 

Property 3B: 
Funds[A]: $3,368,000; 
Full-ownership acres: 156. 

Property 4B: 
Funds[A]: $1,500,000; 
Full-ownership acres: 185. 

Property 5B: 
Funds[A]: $525,000; 
Full-ownership acres: 725 

Property 6B: 
Funds[A]: $300,000; 
Easement acres: 2,160. 

Bureau of Reclamation: Subtotal; 
Funds[A]: $10,235,000; 
Full-ownership acres: 62,323 
Easement acres: 2,160 

Bureau of Reclamation: Total; 
Funds[A]: $19,060,786; 
Full-ownership acres: 80,764; 
Easement acres: 4,647. 

Overall Total; 
Funds[A]: $63,617,257; 
Full-ownership acres: 94,277; 
Easement acres: 7,527. 

[A] In some instances, additional funds from sources other than CVPIA 
were also used in the transaction. 

[B] Sales data were collected under individual property-owner names, 
which have been omitted here. Source: GAO’s analysis of data provided 
by federal agencies. 

[End of table] 

[End of section] 

Footnotes: 

1. P.L. 104-208, Division E, title I, (1996); P.L. 104-333, Division 
I, title XI, (1996). 

2. P.L. 102-575, title XXXIV of the Reclamation Projects Authorization 
and Adjustment Act of 1992. 

[End of document]