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In analyzing whether a rental fee returns fair market value to the landlord, several 

 standard evaluation or appraisal techniques can be used. My testimony will focus 

 on the three approaches which the 1988 General Accounting Office (GAO) fee 

 report to Senator Metzenbaum suggested might be the most accurate indicators of 

 fair market value: 



Percent of net profits paid in rent 



The 1988 General Accounting Office report to Senator Metzenbaum described 

 several studies which suggested that a fee system which captured 10 to 24 percent 

 of an operator's profit would achieve fair market value. 



We submit that both the existing GRFS and the proposed new formula of H.R. 1527 

 do far better than that. 



For example, a 1989 University of Colorado study (the so-called Goeldner study) , 

 revealed that average ski area profits before taxes were 3.5% of revenues. For the 

 same year, 1989: 



the Forest Service told Congressman Synar's Government Operations 

 Subcommittee that ski areas paid an average of 2.4% of revenues in 

 rental fees; 



A 1989 survey by the National Ski Areas Association (NSAA) of its 

 members indicated an average of 2.89% of revenues was paid in fees. 



Using these alternate figures, it can be readily determined that the average rental fee 

 equals from between 69% to 83% of annual profits, which is many times higher 

 than the 10 to 24% recommendations discussed in the GAO study . 



Despite the fact that the ski industry is already exceeding the percent of profitability 

 test cited by GAO, Sno. engineering believes there are drawbacks to its use if 

 revenue neutrality is of concern to the United States. That is because in any given 

 year the Goeldner study and others have estimated that approximately one-third to 

 one-half of ski areas only break even, or lose money, and therefore have little or no 

 profit and would pay no rent. Switching to a percent of profits test, therefore, could 

 significantly reduce revenues to the United States from current levels. 



