47 



sioner's ability to obtain a loan from a bank for investment in the 

 improvement of public parks. 



Let me illustrate by reciting to you the facts in a loan which I 

 serviced for the bank with Forever Resorts, the operators of 

 Callville Bay Marina at the Lake Mead National Recreation Area 

 and of Cottonwood Cove at Lake Mojave. And I want to preface my 

 example by saying that each loan made by my division has very 

 unique characteristics. 



Callville Bay has maintained a borrowing relationship with the 

 bank since 1987. At the time the original loan was underwritten 

 and with each subsequent renewal of the credit, the aforemen- 

 tioned issues continue to surface that inhibit the bank's underwrit- 

 ing process; namely, the value of concessioners' possessory interest 

 in the National Park Service contract and the preferential right of 

 renewal and tenor of concession contract. 



The bank has placed significant reliance on the possessory inter- 

 est of the collateral as defined under the present law in underwrit- 

 ing a loan. The Callville Bay possessory interest, for example, was 

 valued by an independent appraiser sufficient to produce a loan-to- 

 value ratio of approximately 60 percent within the policy estab- 

 lished by the bank for sound lending practices. 



If what Mr. Wilson says about banks taking collateral only as an 

 abundance of caution is true, the appraisal division of his firm may 

 possibly go out of business. The loan for Callville Bay was ulti- 

 mately approved with reliance on the understanding that the 

 possessory interest provided in the concession contract was based 

 on a sound or fair market value of real property. The clauses relat- 

 ing to possessory interest in H.R. 773 and 721 and to a certain ex- 

 tent H.R. 2028 would under the bank's lending policy have pre- 

 vented the loan for Callville Bay from being made. 



Next, it is vital that a lending institution has some predictability 

 about a concessioner's future. The length of term of concession con- 

 tracts and preferential right of renewal are, therefore, also key fac- 

 tors in determining the acceptability of a loan package. Without the 

 security of the preferential right of renewal, approval of the 

 Callville Bay loan referenced earlier would have been denied. 



As previously discussed, H.R. 773 and H.R. 721 radically changes 

 the concept of possessory interest. These bills propose to treat 

 possessory interest in a manner which would cause the amount a 

 concessioner could expect to receive through transfer or sale to be 

 amortized eventually to zero even if the concessioner has faithfully 

 maintained the property and then would have substantial market 

 value in any other context. 



This obviously offers no incentive to a concessioner to invest in 

 the improvement of parks and would also not comprise sufficient 

 collateral to a lender to carry loans for that purpose. If one of your 

 goals is to encourage private sector investments on public lands, 

 this formula should be rejected by the committee as unworkable. 



Also important to the decisions in the loan process in concessions 

 businesses are the length of contract terms and the continuity of 

 service by a concessioner. Other features of H.R. 2028 address 

 these matters, and I would urge you to set a base of at least 10 

 years for all concession contracts with maximum flexibility left to 



