Auditor 03 115

FEBRUARY 2003
REPORT NO. 03-115
AUDITOR GENERAL
William O. Monroe, CPA
DEPARTMENT OF ENVIRONMENTAL PROTECTION

ACQUISITIONS OF LANDS BY THE STATE
JANUARY 1, 2000, THROUGH DECEMBER 31, 2001
$7.8 million less than the actual acquisition price,
SUMMARY
The
Department
of
Environmental
Protection provides staff support to the

Board
of
Trustees
of
the
Internal
Improvement Trust Fund for the acquisition

of lands by the State.
Generals
It is the Auditor
responsibility
to
routinely
monitor these acquisitions and to perform

audits as the Auditor General deems
necessary.
Six acquisitions were selected
for
based
accurate and credible value estimates would have

strengthened
the
Departments
bargaining
position.
Finding No. 2 Appraisal reports for the
$16,314,728 acquisition of the St. Joe Upper
Wacissa River property may have overstated
value conclusions due to inadequate consideration
of environmental, archaeological, and physical
limitations of the property.
risk
Finding No. 3 The St. Johns River Water
The findings below reveal
Management District's timber rights valuation
deficiencies in several acquisitions of the
for the Rayonier-Twelve Mile Swamp project
Department. While Finding Nos. 1 (Kirby
timber
Mine), 2 and 6 (St. Joe Upper Wacissa), and
assumptions related to future timber rights that
3 (Rayonier) each apply to individual
may not have supported the $4,617,970 purchase
acquisitions, Findings 4, 5, and 7 apply to
price.
two or more acquisitions.
Finding No. 4 Unsupported assumptions and
audit
assessments.
on
preliminary
Finding No. 1 The underlying extraordinary

assumption supporting the appraisal reports for
the $10,250,000 purchase of the Kirby Mine
property (Ichetucknee Trace project), which had a
significant effect on the value estimations, was
purchase
contained
questionable
speculative statements in the area analyses and

highest and best use analyses may have led to
inappropriate
selections
and
analyses
of
comparable sales, and may have resulted in

misleading and overstated value conclusions.
unsupported, and may have caused the value
Finding
conclusions to be overstated by as much as $7.8
techniques and other deficiencies in analyzing
million. While we recognize that the Department
sales data may have resulted in inadequately
may not have been able to acquire this property for
supported and misleading appraisal reports.
Page 1 of 20
No.
Inappropriate
appraisal

Finding No. 6 Weaknesses in the verification of
of approved appraisers. An administrative
sales data for the St. Joe Upper Wacissa Tract
review of the appraisals and appraisal
acquisition may have compromised the valuation
reviews is conducted by Department staff for
analyses,
quality assurance purposes and to determine
resulting
in
questionable
value
conclusions.
the maximum approved value, which is the
Finding No. 7 The appraisal reviews did not
maximum purchase price, for negotiation
always address and ensure the correction of
purposes. This maximum approved value is
material weaknesses in the appraisal reports,
the appraised value when one appraisal is
evidencing less than adequate reviews and
obtained, but when two appraisals are
limiting the reliance that can be placed on the
required, it is the higher of the two appraised
appraisals used for the negotiation and acquisition
values or 120 percent of the lower appraised
of real property.
value if the two values differ by more than 20

percent of the lower value.
BACKGROUND
Section 259.041(16), Florida Statutes, provides
Acquisition of lands by the State, other than
that we conduct audits of acquisitions and
for transportation purposes, are generally
divestitures which are deemed necessary,
made by the Board of Trustees of the Internal
according to preliminary assessments of
Improvement Trust Fund utilizing staff of the
board-approved
Department of Environmental Protection
divestitures.
(Department),
During the audit period, the Board of
Division
of
State
Lands.
Chapters 253, 259, and 375, Florida Statutes,

provide
the
authority,
procedures,
and
funding mechanisms for the acquisition of

real property by the State. Department of
Environmental Protection Rule 18-1, Florida
Administrative Code, prescribes additional
State land acquisition procedures.
acquisitions
and
Trustees approved 146 acquisitions, which

included 181,967 acres at a total purchase
price of $350,875,850. The States share of the
purchase price was $284,817,141. Our audit
included six acquisitions totaling 84,256.87
acres, of which 7,911 acres involved the
acquisition of lease interests only. The total
Each parcel to be acquired must have at least
purchase price of these acquisitions was
one appraisal. Two appraisals are required
$100,511,241, and the States share of the
when the estimated value of the parcel
purchase price was $86,773,300, representing
exceeds $1 million. An appraisal review is
25 percent of the total purchase price of the
required for parcels valued over $500,000,
acquisitions approved for purchase during
while appraisals with values less than
the audit period.
$500,000 are reviewed on a randomly selected
Details of these acquisitions are shown in the
basis. Appraisals and appraisal reviews are

typically performed by outside contract
following table:
appraisers who are on the Departments list
Page 2 of 20

Property
Acquisition
Partners
Date of
BOT(1)
Approval
Closing
Date
St. Joe
(Upper
Wacissa)
The Nature
Conservancy
7/25/00
9/27/00
St. Joe
(Torreya)
The Nature
Conservancy
1/23/01
Rayonier
(Pinhook
Swamp)
St. Johns
River Water
Management
District
St. Joe
(Snipe
Island)
Appraised
Values
Purchase
Price
Price
per
Acre
State Share
of Purchase
Price
8,866.70
$15,862,000
17,500,000
$16,314,728
$1,840
$16,314,728
5/29/01
371.07
680,000
652,800
1,759
652,800
3/13/01
8/07/01
56,116.95
60,150,000
63,000,000
58,643,624
1,045
47,214,668
The Nature
Conservancy
3/29/01
4/20/01
10,688.50
9,600,000
10,600,000
10,032,119
939
10,032,119
Kirby Mine
(Ichetucknee
Trace)
N/A
8/28/01
10/05/01
302.35
10,573,500
11,225,000
10,250,000
33,901
10,250,000
Rayonier(2)
(Twelve Mile
Swamp)
St. Johns
River Water
Management
District
8/28/01
9/26/01
7,911.30
5,344,512
4,617,970
584
2,308,985
(1)
(2)
Acreage
(Final)
Board of Trustees of the Internal Improvement Trust Fund.

Less-Than-Fee Simple Acquisition.
SCOPE AND METHODOLOGY
To determine the extent to which the

Department's
The audit was conducted in accordance with
of management's control objectives in the
Auditing Standards issued by the Comptroller
categories of compliance with controlling
General of the United States. The objectives
laws, administrative rules, and other
of the audit were:

document
controls
promote and encourage the achievement
applicable standards contained in Government
To
management
guidelines; the economic and efficient

our
understanding
operation
of
of
State
government;
the
management controls relevant to the
reliability of financial records and reports;
appraisal
and the safeguarding of assets.
of
properties
for
land
acquisitions.
To identify recommended statutory and

fiscal changes that may be included in the
To evaluate management's performance

in
administering
responsibilities
in
its
audit report and subsequently reported to
assigned
accordance
the
with
pursuant
to
Section
11.45(7)(h), Florida Statutes.
applicable laws, administrative rules, and

other guidelines.
Legislature
We performed appropriate audit tests and

procedures to evaluate the Departments land
acquisition processes with regard to the
Page 3 of 20

appraisal reports, the review of the appraisal
to the limerock mining company were
reports, and the negotiation and closing
subject to the general use limerock
process.
adequate
mining permit issued by the Department.
documentation of these processes by the
The remaining 242 acres was neither
Department to indicate compliance with
permitted nor grandfathered for any
controlling
mining activity.
We
tested
laws,
for
rules,
policies,
and
procedures.
Since January 1, 1989,
operators of existing mines that intend to

disturb new surface areas must provide
FINDINGS AND RECOMMENDATIONS
conceptual plans for reclamation as well

as
Finding
No.
1:
obtain
expanded
Extraordinary
general
areas
use
of
permits
mining
for
activity
(Department of Environmental Protection
Assumptions
Rule 62C-36.003, Florida Administrative

On October 5, 2001, the Department closed
Code). Consequently, a new general use
on the $10,250,000 purchase of the Kirby
permit would need to be obtained for the
Mine (Ichetucknee Trace) property located in
242 acres not currently subject to the
Columbia County. The property contained
existing general use permit.
302 acres, including a 120-acre portion which
The adjoining Anderson-Columbia Mine
was leased to a third party for limerock
property had been acquired by the
mining purposes. The Department obtained
Department in September 2000. All of the
a mineral evaluation/appraisal report, two

real
property
appraisal
reports
appraisals
that
utilized
to
Anderson-Columbia
incorporated the mineral value findings, and
acquire
Mine
the
contained
statements that any new mining in the
an appraisal review. The two real property
area
appraisal reports contained estimated values
would
Department.
of $10,573,500 and $11,225,000.
be
opposed
by
the
The Anderson-Columbia
mineral appraisal stated that while new
The extraordinary assumption among all
mining may be allowed in the county, it
three appraisal reports was that the entire 302
would be subject to compliance with
acre parcel was permitted and available for
numerous
limerock mining.
opinion of the appraiser, the likelihood of
We believe that this
requirements
and,
in
assumption is unsupported for the following
any
reasons:
permitted in the future is very small.
Our
review
of
the
permit
(which,
new
limerock
mining
the
being
The Departments appraisal review agreed
although not included in any of the
with
appraisal files, was readily obtainable
assumption that the 302 acres was permitted
from the Department) revealed that only
and available for limerock mining, and
60 of the 120 acres of the property leased
concluded that the three reports were well
Page 4 of 20
the
appraisers
extraordinary

documented and that the final conclusions of
to assume that mining can continue beyond
value
the
appeared
to
be
reasonable
and
existing
approval
periods
or
supportable.
In our opinion, however, as
grandfathering.
indicated
above,
underlying
Professional Appraisal Practice require in
extraordinary assumption supporting the
Standards Rule 1-2(g) that an extraordinary
conclusions in the appraisals, which had a
assumption be used only if: it is required to
significant effect on the value estimations, is
develop credible opinions and conclusions;
unsupported.
the appraiser has a reasonable basis for the
the
From information contained in the appraisal

reports, and based on the mineral reserves
and unit value per ton identified by the
mineral appraiser, but using only the acreage
actually permitted for mining (60 acres), we
estimated an overstatement of approximately
$7.8
million
in
the
estimated
value
attributable to the assumption that the entire

property was permitted for mining. While
we recognize that the Department may not
The Uniform Standards of
extraordinary assumption and the use of the

extraordinary
assumption
credible analysis.
results
in
The appraisers included
this assumption in the event that for some

unforeseen reason the mining does not
continue and that the mining activity ceases
to be allowed. The appraisers assumptions
and opinions of value are reasonable and
credible based on information known and
available as of the date of value.
have been able to acquire this property for
As of the date of the appraisal, Kirby Mine
$7.8 million less than the actual acquisition
was in apparent compliance with required
price, accurate and credible value estimates
permits and regulations.
would have strengthened the Departments
known notices of violation resulting from
bargaining position.
existing operations for adverse impacts to the
We recommend, in the interest of accurate

and credible value estimates, that the
Department ensure that appraisal reports
and reviews are based on credible and
There were no
states environmental resources. At the time

of the appraisal, at least two department
permits, which would have been needed for
renewal or as a new permit, were in the
accurate assumptions as to the allowable
application process.
An application was
uses of properties.
submitted for an Environmental Resource

Permit (ERP) in April 2000 to the DEP Bureau
Department Response:
of Mine Reclamation.
The DEP Northeast
The Department does not agree that the
District had been contacted in 2000 about the
opinions of values are overstated and that the
Industrial Wastewater permit (IW), which
assumptions are not credible as indicated in
was to expire in December 2001.
The
the
applicant
the
Auditor
Generals
finding.
The
voluntarily
suspended
Extraordinary Assumptions referred to in
processing of both the ERP and the IW while
the finding regard whether or not permits for
the process to acquire Kirby Mine was taking
mining would be available and if it is proper
place by the DEP. Both of these permits are
Page 5 of 20

issued for a five-year period.
A mine
enforcement activities only begin when areas
operator typically applies for a land area that
of the mine become available for reclamation.
is projected to be mined over the five-year

period.
Thus, it is common for a mine
landowner to not have permits in place for

the entire land area under their ownership.
As indicated by Joseph Bakker, Chief, Bureau
of Mine Reclamation, DEP, the unpermitted
area is contiguous with the permitted area;
and thus, the permitting of the unpermitted
area would be viewed as an extension of the
existing
operations.
Mr.
Bakker
also
indicated that based on existing technology,

it is reasonable to assume that the mine
operator can implement appropriate mining
methods that would allow him to mine the
previously unpermitted area while providing
reasonable assurance that there will be no
adverse impacts to the states environmental
resources.
As indicated in a letter dated January 19, 2000
from Dale Williams, County Coordinator, on
Board of County Commissioners - Columbia
County letterhead, which is documented in
the appraisal reports: both mines [Kirby and
Anderson Columbia] have been determined
to be legal, nonconforming uses.
These
mining operations and contiguous lands have

been determined to be vested uses, and may
continue as a non-conforming use.
As summarized above, the existing mine was

in
apparent
compliance
with
known
regulations and the necessary applications

were in process to continue the mining.
Based on projections by the consultant
geologist and the appraisers, the existing
mine area would not be depleted for several
more years.
Forecasting political, social,
economic and regulatory influences relating

to a property into the future is difficult. In
that the purchase price of any property
embodies the buyers expectations of the
future value and use of the property, it is a
reasonable assumption relating to Kirby Mine
that at the time additional permits are
needed, the operators of the mine will seek
and comply with regulations and permits.
The quantity and quality of the limerock
reserves were proven at Kirby Mine and the
entire
area
ownership,
under
which
the
would
Kirby
family
influence
an
investor to pay more for this asset than a site

with unknown mineral resources.
An
independent Certified Mineral Appraiser was

hired to provide a report for use by the real
estate appraisers.
A site investigation
relating to the reserves was conducted,

boreholes were drilled and the quality of the
Mine reclamation requirements of Part IV,
limerock was tested at the facilities of
Chapter 378, F.S. and Chapter 62C-36, F.A.C.,
Asphalt
do not provide for permit-like approvals.
unreasonable to assume that an owner would
Under this program, the DEP does not have
seek to exploit all of the reserves.
the authority to approve or disapprove

mining or mining operations.
reclamation
program,
Under the
compliance
and
Technologies,
Inc.
It
is
not
Additionally, mine activity has occurred at

Kirby Mine since the 1950s; thus, it is a
reasonable assumption that mining will
Page 6 of 20

continue over the projection period in the
documentation to indicate that the permit
appraisal reports.
application was intended to extend the mining
The Department feels that assumptions

employed in the appraisals were reasonable
and the valuation was credible for the entire
subject area given what was known at the
time.
There was no indication that the
necessary permits for expanded mining

activities would have been denied.
appeared to indicate an intent to extend to only

120 acres. The Secretary has not provided any
documentation to indicate that the State-issued
permit for mining would likely have been
extended to any parts of the purchased land other
than the 60 acre parcel. Accordingly, we continue
to believe that the value estimations supporting
Follow-up to Department Response:
the amount paid for the land in December 2001
The Secretary, in his response to this finding,

stated that the Department does not agree that the
opinions of value are overstated and that the
assumptions are not credible.
activity from 60 acres to 302 acres, but rather
The Secretary
concluded that limerock mining of the entire site

is grandfathered and referenced a letter from
Columbia County to support his conclusion.
were unsupported.
Finding
No.
2:
Consideration
of
Environmental and Other Limitations

On September 27, 2000, the Department
closed on the $16,314,728 purchase of the
Upper Wacissa Tract (Tract) that includes
The letter from Columbia County referenced by
8,867 final surveyed acres and is dominated
the Secretary is a letter from a Columbia County
by jurisdictional wetlands (73 percent) and
Coordinator to the sellers of the property stating
low flatwoods. The appraised values for this
that the existing mine has been determined to be a
acquisition were $15,862,000 and $17,500,000.
legal, non-conforming use of the land in
The Tract is located on the east and west
accordance
County
sides of the Wacissa River and is accessible
Comprehensive Plan and that the mining
only by easements that are one-lane dirt
operation and contiguous lands have been
timber roads.
determined to be vested uses in accordance with
frontage is dominated almost entirely by
Columbia
with
County
the
Columbia
Land
Development
Regulations.
The subject property's river
jurisdictional wetlands.
Approximately 90
percent of the property lies within the 100-
The letter from the County referred to by the
year flood zone, and a high percentage of the
Secretary indicates that the Columbia County
property is often flooded, including some of
Land Development Regulations could allow for
the interior access trail roads.
mining beyond the existing mine; however,

mining of land beyond the 60 acres would be
subject to further permitting by the State. The
Secretary referred to a permit application that was
suspended while the process to acquire the Kirby
Mine was taking place.
There was no
Both appraisers acknowledged in their report

that only about 30 percent of the overall tract
is useable due to the high percentage of
wetlands, scattered uplands, difficult access,
and poor soil conditions.
developing
Page 7 of 20
their
value
Nevertheless, in
estimates,
the

appraisers
appear
to
have
placed
less
data, and subjective adjustment analyses. As
emphasis on the physical limitations of the
subject property and much greater emphasis
conclusions in the appraisal reports, we
on
superior
compared the comparable sales used in the
location, development potential, and
appraisals to the subject based on a price per
river amenity.
useable acre, which we believe is a more
unsupported
Our
analysis
claims
of
the
of
appraisal
reports,
appraisal files, and acquisition files disclosed

no
mention
or
archaeological
property,
consideration
sensitivity
which
has
for
its
reputation
of
of
the
the
subject
well-publicized
historical
and
check
for
reasonableness
of
value
appropriate unit of comparison, given the

subject propertys low percentage of useable
land (all of the comparable sales had higher
percentages of useable land than the subject).
Using the value conclusions and sales data in
the appraisal reports, we calculated and
archaeological significance as documented in
compared
the 2000 Conservation and Recreation Lands
excluding timber value estimates, of the
(CARL) Report and the 2001 Florida Forever
subject property and sales of comparable
Report. Our review disclosed that the subject
properties. The price per useable acre of the
property would likely face difficulties in
comparable sales ranged from $1,238 to
obtaining permits for additional roads or
$2,910. We calculated one appraisers value
other
or
conclusion on a per useable acre basis at
archeological sites would be impacted. We
$4,167, which is far above the range of the
found that at least 40 archaeological sites
sales data.
have
subject
excluding the timber value estimate, was
property, making it subject to stringent
calculated at $4,784 per useable acre. Both
restrictions on development.
appraisers
development
been
where
discovered
wetlands
on
the
These issues raise concerns over the validity

of
the
appraised
values.
Furthermore,
Department of Environmental Protection

Rule
18-1.006(3),
Florida
Administrative
Code, requires that appraisal reports address

environmental
permitting
sensitivity
requirements
and
applicable
relating
to
development potential. The appraisal reports
the
value
per
useable
acre,
The other appraisers value,
viewed
the
comparable
sale
located in Jefferson County ($2,910 per

useable acre) as overall superior to the subject
property. This indicates that the appraisers
valuation analysis may be flawed, and the
value
conclusions
overstated,
since
the
subjects value should fall within the range of

the sales data if both inferior and superior
sales are used.
relied upon by the Department did not
We recommend that the Department assure
appear to adequately address these factors.
that fee appraisers exercise due diligence in
The
appraisers
justified
their
value
conclusions by using price per gross acre as

the unit of comparison, a wide range of sales
collecting
and
properly
analyzing
all
environmental, archeological, and physical

limitations in the valuation of properties
considered
Page 8 of 20
for
acquisition.
We
also

recommend that the Department strictly
both for the current recreational use and
enforce all administrative rules relating to
potential development in the future.
appraisal reports.
The
Department
agrees
with
the
recommendations as to appraisals in general;
The appraisal reports apply appropriate
however, in regard to this finding the
methodology and analysis consistent with the

opinion as to the highest and best use of the
property.
determined
The highest and best use is

to
be
recreational use.
for
silviculture
and
Recreational use may
include outdoor activities such as hunting,

canoeing, hiking, camping, mountain biking
or other similar activities. These recreational
uses are compatible and can coexist with
silviculture use. The analysis of the subject,
the highest and best use determination and
the comparable sales analysis are consistent
within the reports.
Suggestions in the
Department
believes
that
methodology
was
applied
appropriate
and
the
conclusions in the appraisal reports are

reasonable.
The Secretarys response states that the highest
and best use conclusions for the subject property
are silviculture and recreation and that basing the
value on only usable acres is not applicable to
such uses. The Department, therefore, concludes
that our concerns about the archaeological
significance, extensive wetlands, and lack of
useable acres as a unit of comparison are not
Auditors report that archeological sites and
applicable to the highest and best use. However,
wetlands may affect the future development
both
potential are not pertinent to the current
residential use as a third component of the highest
highest and best use of the site.
The
and best use and give substantial weight to this
alternative analysis in the Auditors report
component in the valuation analyses without
that the valuation be based on usable acres as
proper recognition of the legal and physical
a unit of comparison is also not applicable to
limitations of the property arising from extensive
the current highest and best use of the subject
wetlands, limited access, and archaeological
as silviculture and recreational property.
significance. Further, given the low percentage of
Reference
to
the
future
development
potential in the appraisal reports is used only

as an influence on the value of the subject
within the range of prices indicated by the
market consistent with the current highest
and best use determination. The appraisers
appraisal
reports
also
include
rural
useable land due to extensive wetlands, even for a

silvicultural use, we believe a valuation analysis
using useable acres as a unit of comparison would
be appropriate in determining a credible value
conclusion.
Finding No. 3: Timber Rights Valuation
apply judgment and do not ignore the fact

that the subject has a substantial amount of
On February 19, 2001, the Department and
river frontage, which has an impact on value
the St. Johns River Water Management

District (District), through a joint acquisition,
Page 9 of 20

closed on the $20,138,405 purchase of a 21,898
property from the lessee, and that cruise was
acre tract of land within the Twelve Mile
subsequently audited by an independent
Swamp land acquisition project.
timber expert.
The land
Although the timber cruise
was acquired subject to an existing timber
obtained by the District stated that the
lease, which excludes public access and does
volume of standing pine timber was only
not terminate until December 31, 2025. On
seven percent of the total volume of product
September 26, 2001, the Department and the
present on the 7,636 acres, the District's
District closed on the purchase of certain
memorandum regarding the value of the
outstanding leasehold interests on 7,911 acres
future timber rights assumed that 83 percent
(97 percent wetlands) of the larger parcel for
of the 7,636 acres of wetlands could be put
a purchase price of $4,617,970. Of the 7,911
into pine production by bedding and aerially
acres, timber harvesting rights were acquired
seeding (planting methods).
on 7,533 acres, public access rights were
evidence
acquired on 275 acres (plus some harvesting
determine the financial feasibility of placing
restrictions), and both timber and public
the wetlands into pine production.
access rights were acquired on 103 acres.
of
cost/benefit
We found no
analysis
to
The basis for, and the reasonableness of, this
In a memorandum dated August 13, 2001, the
significant assumed change to silviculture
Director, Division of Land Management, St.
(tree farming) on the subject wetlands (i.e.,
Johns River Water Management District,
the assumption that 83 percent could be put
provided a summary of the methodology for
into pine production) was not explained or
estimating the value of the timber interest.
justified in the memorandum.
The estimated value was $5,344,512 for the

timber rights and public access rights on the
7,911 acres.
The valuation consisted of an
estimated value of the standing timber

($3,687,453) and an estimated present value
We recommend that the Department and the

District carefully document and justify
extraordinary assumptions made in any
type of written communication rendered or
obtained, and relied upon, by staff or
of future timber earnings ($1,657,059).
independent experts.
Based
on
soil
maps,
the
District's
memorandum indicated that of the 7,636

acres (7,533 plus 103 acres) with timber
harvesting rights, 2,955 acres would be
classified as plantable pine, 3,325 acres would
be classified as non-plantable pine, and 1,356
acres would be classified as non-plantable
non-pine.
The Department agrees that oversight of the

appraisal process in joint acquisitions with
the water management districts should be
improved.
findings,
In response to previous audit

the
Division
of
State
Lands
instituted a policy of reviewing appraisal

reports acquired by water management
The District had obtained a timber cruise
districts for joint acquisitions.
report of the natural stand timber on the

Page 10 of 20

As a result of this policy, the Department is
justify and support this assumption.
performing technical and/or administrative
Considering the lack of relevant sales
reviews on pending joint acquisitions with
data in the subject vicinity, there appears
water
to be no basis for the belief that the stated
management
districts.
The
Department is also providing input into the

selection of appraisers on joint projects.
Finding No. 4:
demand exists.
Elsewhere in the report, the appraiser
Highest and Best Use
Analyses and Area Analyses
stated that the county in which the

property
is
populated
located
area
is
is
experiencing
that
sparsely
In determining the most probable and
moderate to slow growth at best and
maximally productive use for a property, it is
growth and development is extremely
imperative that the appraiser provide market
limited. The appraisers analysis of the
evidence to show that adequate demand
sales
exists in the propertys neighborhood to
overemphasized
justify the conclusion of the highest and best
demand for the stated highest and best
use. Our review of the highest and best use
use of the subject property which may not
determinations in the appraisal reports for
be reflected in the market. This may have
the
led to an overstated value conclusion.
selected
acquisitions
disclosed
the
following:
data
appears
to
the
have
unsupported
St. Joe (Upper Wacissa): One appraiser
St. Joe (Torreya): The appraiser stated in
concluded that the highest and best use of
his report that rural acreage is currently
this property was a blend of agricultural
in a state of very high demand, driven by
(silviculture),
buyers who are acquiring large acreage
residential uses.
tracts within easy commuting distance of
estimated the highest and best use to be
major metropolitan communities.
for a recreational type use or large
The
recreational,
acreage
recreational purposes such as private
conjunction
hunting,
agricultural/silvicultural
estates,
and
rural
The other appraiser
tracts are being purchased primarily for

family
rural
and
residential
with
use
in
continued
use.
The
supplemental/part-time agricultural use.
highest and best use analyses lacked
The appraiser concluded that, as a result
adequate market support to justify the
of being approximately one hour from
residential and recreational uses which
Tallahassee, properties in the subject
were given substantial emphasis in the
neighborhood are good candidates for
valuation analyses. This may have led to
this type buyer. The appraiser made this
an
statement concerning demand without
elements of comparison that may not
providing
evidence,
have had a material impact on the
especially in the subject neighborhood, to
subjects value. While the silviculture use
any
market
Page 11 of 20
overemphasis
on
less
important

on the useable land (approximately one-
production with the possibility of low
third of the property) is reasonable, the
intensity development at some point in
appraisers provided no detailed market
the distant future.
support
concerning
report contained similar statements as to
demand attributable to the river and
the nature of the area and concluded a
proximity to Tallahassee (20 miles to the
similar
west), especially in light of the property's
silviculture/recreational, with long term
limitations mentioned in Finding No. 2.
speculative investment.
We found additional sales data that may
The Supplemental Appraisal Standards
be more appropriate in valuing this
for Board of Trustees Land Acquisitions
property than some of the sales used by
states that highest and best use shall be
the appraisers.
For example, the Snipe
considered to apply to the immediate
Island Tract, another State acquisition
future, which shall mean a period of time
located approximately eight miles south
not to exceed five years. The highest and
of the subject property in the same
best use estimate is a logical extension of
project, is similar in size, topography,
the area analysis, and the appraiser is
access and amenities to the Upper
required to comment on existing land use
Wacissa tract. The comparable sales used
patterns
in the appraisals for the Snipe Island tract
property, and its relationship to those use
were more similar to the Upper Wacissa
patterns. Phrases used in the appraisal
Tract
sales
reports, such as long term and distant
Wacissa
future, are vague and indefinite and do
for
than
emphasized
statements
the
in
comparable
the
Upper
appraisals, with lower prices per acre.

Rayonier
(Pinhook
Swamp):
acquired
property
is
not
The
highest
The other appraisal
and
best
surrounding
comply
with
the
the
use
of
subject
Supplemental
Appraisal Standards.
in
Both reports contain statements that the
northwestern Baker County and abuts the
possibility of future development was
Georgia state line near the Okefenokee
identified for the subject property due to
Swamp. One appraisal report describes
its proximity to Jacksonville.
the Baker County area as one that has
report contained market based data to
experienced
an
support this assertion. The descriptions
extended period of time, and the long-
and analyses of the subject property's lack
term outlook is for continued slow
of development potential are inconsistent
growth.
with
slow
located
growth
over
The appraisal report's highest
assertions
as
to
Neither
development
and best use analysis states that land use
potential made in the valuation analyses.
classifications limit development to low
The appraiser should not assume that an
intensity development. The highest and
element of comparison affects value
best
use
conclusion
was
timber
Page 12 of 20

unless its influence is indicated by the
timeframes and their impact on value, as
market data.
indicated in the Supplemental Standards.
The
above
noted
inconsistencies,
Other concerns expressed in this finding
unsupported assumptions, and questionable
regard areas where an appraisers judgment
sales analyses may have led to misleading
is applied to the analysis of the data. The
and overstated value conclusions.
finding posits that the substantial river
We recommend the Department require

consistency within appraisal reports and
market evidence to support demand for
highest and best use conclusions, and
frontage on the Upper Wacissa parcel not be

reflected as an influence on value because the
highest and best use within the five year
period is deemed to be for silviculture,
appraisal
recreational and rural residential use. If a set
standards relating to the period of time to
of comparable sales does not have river
be considered in highest and best use
frontage, this might be interpreted, as
analyses be adhered to.
suggested in this finding, as saying there is
ensure
that
supplemental
no market evidence that a river would
influence
the
value
The Department recognizes the desirability of
However,
the
Department
consistency throughout appraisal reports and
appraiser, in using judgment and knowledge
that the Supplemental Appraisals Standards
from
be substantially followed. As stated on page
reasonably conclude that river frontage does
1, Section A of the Supplemental Appraisal
have an impact on value, whether or not it be
Standards, the supplemental standards have
within the five year time period suggested in
been created to serve only as a guideline in
the Supplemental Appraisal Standards for
the
review
the highest and best use. Furthermore, the
procedures and that the Uniform Standards
appraisals conform to the Uniform Standards
of Professional Appraisal Practice shall serve
of Professional Appraisal Practice Standards
as the most appropriate instruction.
As
Rule 1-3(b), which states: an appraiser must
contract
develop an opinion of the highest and best
appraisers have deviated from using specific
use of the real estate; and Standards Rule 1-
terminology in the Supplemental Standards
4(a)
regarding the five year time period to be
comparison
considered in analyzing the highest and best
appraiser must analyze such comparable
use
sales data as are available to indicate a value
appraisal
indicated
of
in
the
and
this
appraisal
finding,
subject.
the
Appraisers
used
terminology such as distant future and

long term which were deemed vague in the
finding.
Contract appraisers and reviewers will be
directed to use clearer terminology regarding
other
which
appraisal
states
of
property.
believes
experience,
that:
approach
the
is
when
an
could
applicable,
sales
an
conclusion.
The Secretarys response to this finding indicates
that an appraiser, in using judgment and
Page 13 of 20

knowledge from other appraisal experience, could
Real Estate, Eleventh Edition, adjustments
reasonably conclude that river frontage does have
derived in comparative analysis should
an impact on value. However, the Secretary did
be expressed in "descriptive terms that
not provide the basis for such a conclusion in the
clearly convey the magnitude of the
instant circumstance, i.e., extensive wetlands
difference in the element of comparison
surrounding the property thus limiting access and
between the comparable and the subject."
development potential.
The Secretary did not
address the additional sales data referred to in the

finding that were more similar to the subject
property than those included in the appraisal
reports.
appraisal
reports
for
all
of
the
acquisitions were comparisons of the subject

properties to comparable properties that had
been sold recently. While the sales price of a
comparable property can be used as an
indicator of value for the subject property, it
is often necessary to consider adjustments for
between
the
comparable properties.
subject
and
Our review of the
appraisal reports disclosed the following

concerns regarding the techniques applied in
analyzing the sales of comparable properties,
inconsistencies,
inadequate
support,
and
illogical statements concerning adjustments

to the sales data that have likely damaged the
credibility
acquisitions
provided
included
in
for
this
the
audit
generally contained statements as to

whether for each element of comparison
similar, or superior to the subject
Essential to the value conclusions stated in
differences
appraisals
the comparable property is inferior,
Finding No. 5: Analysis of Sales Data
the
The
and
reliability
of
the
value
conclusions:
A common problem among the appraisal
reports,
that
included
the
sales
comparison approach to value the land, is

the lack of an indication as to the
magnitude
of
adjustments
valuation analyses.
in
the
As stated in the
Appraisal Institutes text, The Appraisal of

Page 14 of 20
property. For example, one appraisal of

the Upper Wacissa tract indicated the
following comparisons of comparable
sale No. 1 to the subject: the tracts
public access (both paved and graded)
was considered superior to the subjects
easement
access.
aesthetics/unique
Also,
qualities
the
associated
with this propertys frontage on two

freshwater lakes were viewed as inferior
to the subjects frontage along a crystal
clear, spring fed river.
The appraiser
neither indicated the magnitude of the

value
impact
for
each
element
of
comparison nor which elements had

greater impacts on the subjects value,
especially in light of the subjects highest
and best use.
In responding to the review appraisers
concern about the comparable sales
chosen by the appraiser of the St. Joe
(Torreya
State
Park
Additions)
acquisition, the appraiser stated: ...it was

appropriate to try to compensate for the
subjects attribute of being adjacent a

conservation/recreation
area
and
its
such as price per acre and size, for the
inclusion of unique topographical and
group of comparable sales.
vegetative
by
analysis to be relevant and reasonably
including sales which had the positive
accurate, it is important to have a
characteristic of being slightly closer to
sufficient population size and similar
Leon County/Tallahassee. The logic of
sales data to the subject property. The
comparing dissimilar characteristics is not
appraisers application of this statistical
apparent. To compound the problem, in
analysis is questionable, because the
addition to offsetting a characteristic with
population of the analysis included only
a dissimilar characteristic, the appraiser
five sales, which were not all reasonably
made
comparable to the subject property as to
features.
adjustments
did
for
this
location,
For this
topography, and amenities in his sales
size, access, and topography.
comparison analysis.
excessive range of values due to the use
The same appraisal report for the St. Joe

(Torreya
State
Park
Additions)
acquisition, contrary to paragraph A-8.01

of the Supplemental Appraisal Standards
for Board of Trustees Land Acquisitions,
included a government purchase of 40
acres in his analysis with other private
party sales and placed the greatest weight
of
sales
that
were
not
The
reasonably
comparable may have skewed the results

of the statistical analysis resulting in
misleading conclusions. The appraisers
reconciliation of the final value estimate
for the St. Joe (Upper Wacissa Tract)
appears to have placed substantial weight
on the results of his statistical analysis.
on this sale in reconciling a value
The preliminary analysis of the mineral
conclusion of Parcel 2 of the Torreya
component of the St. Joe (Snipe Island)
acquisition.
acquisition revealed that due to stringent
Paragraph A-8.01 requires
that if appraisers use government related
permitting
sales in their market approach, they must
reserve amounts, and a lack of adequate
be analyzed and considered separately
demand, the appraisers acknowledged
from
little effect on the property value, if any,
the
analysis
of
private
party
transactions.
requirements,
uncertain
of the mineral reserves on the property.
One appraiser appraised two of the

subject properties, (1) St. Joe (Upper
Wacissa Tract) and (2) St. Joe (Snipe
Island). In the valuation analysis of both
However, in the valuation section, the

opposite is true.
The appraisers made
adjustments to the comparable sales in

favor of the subjects mineral reserves.
reports, he applied a statistical analysis to
In one appraisers report, the rankings for
the comparable sales data which involved
the location adjustment for Sales 1, 2, and
determining the minimum, maximum,
3 on the sales comparison grid did not
mean, and median for various factors,
agree with the narrative discussion. The
Page 15 of 20

narrative stated that the sales were
The problems discussed above have resulted
ranked
in inadequately supported and misleading
similar,
similar,
and
inferior, respectively, while the chart

showed
the
sales
as
superior,
superior, and similar.
appraisal reports.
We recommend that the Department be
more diligent in evaluating the adequacy
Both appraisers of the St. Joe (Upper
and appropriateness of the selection and
Wacissa) property analyzed the location
analyses of comparable sales.
and
amenities
adjustments
(water
from
frontage)
residential
development perspective rather than the

primary use of the subject as timberland
and
non-useable
wetlands.
The
appraisers indicated that the Flagler

County sale was located in an inferior
area with less development potential than
the subject and had an inferior water
amenity.
Our
inspection
of
this
comparable sale and the subject property

revealed that the two properties were
very similar in regards to location and
water frontage and both had very limited
access to the water bodies due to
wetlands.
The location and water
amenity have little, if any, positive impact

on the value of the subject property in
view of the subjects primary highest and
best use, which is silviculture on the
useable land. The secondary uses of the
subject
property
would
likely
be
immaterial due to the physical and legal

restrictions addressed in Finding No. 2.
In fact, the river would likely inhibit
access to the subject for harvesting timber
As is usually the case in the appraisal of rural

land and is exhibited in the appraisals
discussed in this finding, sales data is sparse,
which limits the quantity of and similarity of
the sales to the subject.
sometimes
not
adjustments
for
Hence, data is
available
from
specific
which
elements
of
comparison can be isolated and extracted

through paired sale analysis.
Qualitative
comparison of sales data is an acceptable

practice. Ranking adjustments for differing
elements of comparison as similar, inferior or
superior leads to an overall cumulative
conclusion as to whether or not the unit price
paid for a given sale is above, below or
similar to what would be anticipated to be
paid for the property being appraised.
Selection of comparable sales involves an
understanding of the market in which the
subject
competes
through
research
and
analysis; yet, it also involves subjectivity

when there is a lack of sales. In these cases,
sales may be selected that are not that similar
to the subject.
and may even have a negative impact on
The St. Joe/ Snipe Island appraisals included
value from this standpoint.
mineral
valuation
component
and
qualitative adjustment factors in the sales

comparison analysis that indicated certain
sales were inferior as a result of them not
Page 16 of 20

having any or low mineral reserves potential.
indicate a lack of demand, which negatively
This adjustment factor, as well as the location
impacts value.
adjustment factor in one of the appraisals, are

only part of the list of adjustment factors,
which do not relate to specific dollar or
percentage
adjustments.
The
overall
conclusion as to whether a sale is inferior,

similar
or
superior
considers
the
aforementioned factors and others, so the

final
conclusion
reflects
all
of
the
characteristics affecting the opinion of value.

Thus,
what
may
appear
to
be
an
inappropriate selection of sales is the result of

few sales from which to choose.
Finding No. 6: Verification of Sales Data

The Supplemental Appraisal Standards for
Board of Trustees Land Acquisitions, Section
A-8.03 states, All sales, rentals, offerings or
contracts shall be verified by the appraiser or
his staff with either a party to the transaction
or the agent handling the transaction.
One appraisal for the St. Joe (Upper Wacissa
Tract)
did
not
indicate
independent
verification of three of five sales used in the

analyses, but rather relied on third party
verification, which is not permitted in the
The Secretarys response indicated a lack of
Supplemental Appraisal Standards. Three of
similar sales in some cases requiring the use of

subjectivity in appraising the subject property.
the sales were either verified by the second

appraiser or by an unrelated party to the
However, we believe that such a lack of sales of
transaction.
similar properties requires greater due diligence
verify the land sale of one comparable sale
and oversight to ensure that all relevant market
with a party to the transaction, but rather
data is discovered and adequately analyzed.
with third parties related only to the
Further, these conditions impose a greater need to
purchase of the timber interests.
include all factors affecting the analysis in the
Lack of compliance with applicable standards
appraisal reports.
The other appraiser did not
can result in the appraisers using inaccurate
While we recognize that it is sometimes difficult
information as a basis for their valuation
to find good sales data from which to choose
analyses.
comparable
sales
and
make
appropriate
quantitative adjustments, in this audit we found

that more appropriate sales data was available in
the market and could have been used to value the
We recommend that the Department enforce

applicable
standards
pertaining
to
verification of sales data.
Upper Wacissa parcel, as discussed in Finding
No. 4. The use of more relevant sales data, with
The
proper analysis, would likely have resulted in
Supplemental Appraisal Standards should be
lower value conclusions. Further, appraisers also
enforced in regard to the verification of sales.
need to assess whether a lack of sales data may
The Standard requires that the appraiser or
Department
agrees
that
the
his staff verify sales with either a party to the

Page 17 of 20

transaction
or
transaction.
the
agent
handling
the
However, the reliability and
subsequently provide
the supporting
documentation, and the issue was not
credibility of the appraisal report is not
raised again by the reviewer.
necessarily compromised if the sales data is
concern
obtained
deemed
correction letter for the second appraisal
reliable. There may be circumstances where
even though this appraisal report had the
contact with either party to a transaction is
same problems. In the review appraiser's
not possible or practical; and given time
report, the reviewer commented about
constraints
the property's remote location and lack of
from
another
regarding
source
appraisal
report
was
not
addressed
This
in
the
delivery due dates, verification with a party
future
to the transaction may not be possible, even
acquiesced
to
though attempts were made.
Secondary
unsupported
claims
verification
the
property's desirability and potential (see
sources
may
be
only
development
potential,
the
but
appraisers
of
the
subject
alternative in certain circumstances.
Finding No. 4).
These situations have been addressed in the
As discussed in Finding No. 2, a
past, and attention to this will be made again
significant omission from the appraisal
through staff appraisers and contract fee
reports and reviews was the failure to
appraiser reviewers.
In regard to the
consider and explain the archaeological
verification requirement, the Supplemental
and environmental sensitivity of the
Appraisal Standards will be enforced.
subject parcel. We found no evidence in

the appraisal reviews or the Department
Finding No. 7: Appraisal Reviews
acquisition
Our audit disclosed a recurring lack of

identification and correction by the review
appraisers of material deficiencies in the
appraisal
reports
relied
upon
by
the
addressed
and
this
appraisal
files
that
important
issue
that
would likely have a material impact on

the market value of the property.
St. Joe (Snipe Island):
The appraisal
Department in acquiring millions of dollars
review did not address the following
of land on behalf of the State.
inconsistencies within and between the
In addition to Finding Nos. 1 through 6, our
audit disclosed the following:

St. Joe (Upper Wacissa Tract):
In the
correction request letter from the review

appraiser to the appraiser, the reviewer
questioned an appraisal reports lack of
support for emphasis on the subject's
location
potential.
and
The
future
appraisal reports:
development
appraiser
did
not
Page 18 of 20
One appraiser adjusted five out of

six sales for encumbrances (power
line easement), while the other
appraiser did not consider the
impact
significant
enough
to
include this component in the

analysis.

-
One appraiser adjusted all six sales
Rule 2-2a(x): rationale and support of
for topography, while the other
highest and best use (see Finding No. 4);
appraiser did not adjust any of the
Rule
sales for topography.

-
1-3(a):
unsupported
market
assumptions (see Finding Nos. 2 and 4);
As discussed in Finding No. 5, in
Rule 1-1(a): applying recognized methods
one appraisal report, the rankings
and techniques to provide a credible
for location for three sales did not
report (see Finding No. 5);
agree with the narrative discussion.
Rule 1-4: verification of sales data (see
The narrative stated that the sales
Finding No. 6);
were ranked similar, similar,

and inferior, respectively, while
Based on our findings, it appears that the
the chart showed the sales as
review appraisers are not ensuring that
superior,
appraisers fully comply with applicable
superior,
and
similar.
appraisal standards, nor are they providing
Rayonier (Pinhook Swamp): Neither the
accurate opinions of the quality and accuracy
appraisal review nor the Departments
of appraisal reports.
administrative review of the appraisal
Our findings revealed that the review
reports and appraisal review report noted
appraisers are not consistently complying
or appeared to question any of the
with Standard 3 of USPAP which requires
deficiencies found in the appraisal reports
reviewers to develop and report a credible
concerning the market, highest and best
opinion as to the quality of the fee appraisers
use, and valuation analyses discussed in
work.
Finding No. 4.
We
recommend
that
the
Department
The deficiencies discussed above, and in the
exercise greater diligence in overseeing
previous
in
review appraisers work to ensure that
misleading
review appraisers strictly comply with
appraisal reports which may have led to
applicable appraisal standards and resolve
overstated value conclusions. The Uniform
all inconsistencies within and between
Standards of Professional Appraisal Practice
appraisals.
(USPAP), as promulgated by the Appraisal
findings,
inadequately
Standards
Foundation,
have
supported
Board
appear
resulted
and
of
the
to
have
Appraisal
not
been
followed and are summarized below:

Rule 2-1(c): disclosure of extraordinary
The Department agrees that appraisers are to

comply with applicable appraisal standards
and that there be consistency in the appraisal
reports.
This is done through the use of
assumptions and their impact on value
contract review appraisers for parcels with
(see Finding Nos. 1 and 3);
values
Page 19 of 20
over
$500,000
and
through

administrative
reviews
of
appraisals
of
AUTHORITY
parcels with values less than $500,000. When

the contract review appraiser submitted
Pursuant to the provisions of Section 11.45,
questions to the appraiser, the responses may
Florida Statutes, I have directed that this report be
have been verbal, by letter or through
prepared to present the results of our operational
replacement pages in the appraisal report

itself.
audit.
Thus, an audit may not reveal the
manner in which the response was given to

satisfy the review appraisers questions. In
the end, we feel confident that the USPAP
William O. Monroe, CPA

Auditor General
standards were upheld.

To
ensure
that
satisfaction
of
review
AUDITEE RESPONSE
questions is made and the process can be

understood by others, contract reviewers will
be instructed to provide comments in the
appraisal
review
report
when
verbal
The Secretary of the Florida Department of

Environmental Protection, in a letter dated
January 27, 2003, provided his response to our
responses to questions are given, to obtain
audit findings and recommendations.
replacement pages for the appraisal or to
from the Secretarys response are included under
document on the review letter to the
the applicable findings and recommendations
appraiser as to how each question was
above. The Secretarys response, in its entirety,
satisfied.
may be viewed on the Auditor Generals Web site.
Excerpts
To promote accountability in government and improvement in government operations, the Auditor General makes
operational audits of selected programs, activities, and functions of State agencies. This operational audit was
made in accordance with applicable audit standards contained in Government Auditing Standards issued by the
Comptroller General of the United States. This audit was conducted by Mark Hesoun and supervised by Dick
Heller. Please address inquiries regarding this report to Jim Dwyer, CPA, Audit Manager, via e-mail at
jimdwyer@aud.state.fl.us or by telephone at (850) 487-9031.
This report and other audit reports prepared by the Auditor General can be obtained on our Web site at
http://www.state.fl.us/audgen; by telephone at (850) 487-9024; or by mail at G74 Claude Pepper Building, 111
West Madison Street, Tallahassee, Florida 32399-1450.
Page 20 of 20

Auditor 03 115

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Auditor 03 115

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FEBRUARY 2003

REPORT NO. 03-115

DEPARTMENT OF ENVIRONMENTAL PROTECTION

Protection provides staff support to the

Improvement Trust Fund for the acquisition

monitor these acquisitions and to perform

Six acquisitions were selected

accurate and credible value estimates would have

Finding No. 3 The St. Johns River Water

The findings below reveal

Management District's timber rights valuation

deficiencies in several acquisitions of the

for the Rayonier-Twelve Mile Swamp project

Department. While Finding Nos. 1 (Kirby

Mine), 2 and 6 (St. Joe Upper Wacissa), and

assumptions related to future timber rights that

3 (Rayonier) each apply to individual

may not have supported the $4,617,970 purchase

acquisitions, Findings 4, 5, and 7 apply to

two or more acquisitions.

Finding No. 4 Unsupported assumptions and

Finding No. 1 The underlying extraordinary

speculative statements in the area analyses and

comparable sales, and may have resulted in

unsupported, and may have caused the value

conclusions to be overstated by as much as $7.8

techniques and other deficiencies in analyzing

million. While we recognize that the Department

sales data may have resulted in inadequately

may not have been able to acquire this property for

supported and misleading appraisal reports.

DEPARTMENT OF ENVIRONMENTAL PROTECTION

of approved appraisers. An administrative

sales data for the St. Joe Upper Wacissa Tract

review of the appraisals and appraisal

acquisition may have compromised the valuation

reviews is conducted by Department staff for

quality assurance purposes and to determine

the maximum approved value, which is the

Finding No. 7 The appraisal reviews did not

maximum purchase price, for negotiation

always address and ensure the correction of

purposes. This maximum approved value is

material weaknesses in the appraisal reports,

the appraised value when one appraisal is

evidencing less than adequate reviews and

obtained, but when two appraisals are

limiting the reliance that can be placed on the

required, it is the higher of the two appraised

appraisals used for the negotiation and acquisition

values or 120 percent of the lower appraised

value if the two values differ by more than 20

Section 259.041(16), Florida Statutes, provides

Acquisition of lands by the State, other than

that we conduct audits of acquisitions and

for transportation purposes, are generally

divestitures which are deemed necessary,

made by the Board of Trustees of the Internal

according to preliminary assessments of

Improvement Trust Fund utilizing staff of the

Department of Environmental Protection

During the audit period, the Board of

Chapters 253, 259, and 375, Florida Statutes,

funding mechanisms for the acquisition of