RENT METHODOLOGY STUDY – LAKE TAHOE Prepared for: California State Lands Commission 100 Howe Avenue, Suite 100-S Sacramento, CA 95825 February 21, 2020 Ninette Lee, Public Land Manager California State Lands Commission 100 Howe Avenue, Suite 100-S Sacramento, CA 95825 Re: Lake Tahoe Self-Contained Rent Methodology Study File Name: TDG 2019 048 State of CA Agreement # C2018065 Dear Ms. Lee: Pursuant to your request, I performed an analysis of the benchmark rental rate methodology used by the California State Lands Commission (herein referred to as “Commission” and/or “SLC”) to determine rental rates for over 600 leases in the Lake Tahoe area. These leases include private piers and buoys (Category 1); and upland fill area (Category 2). I have completed the analysis and provided recommendations based on the Scope of Work. I have analyzed market data throughout the State of California in order to prepare the following rent methodology study. This report was prepared for the client, the California State Lands Commission, and authorized representatives, and is intended only for their specified use. The intended use of this appraisal is to assist the Commission in establishing the methodology to determine appropriate rents for those privately-owned piers (berths), buoys, and fill areas on Lake Tahoe. The purpose of the appraisal is to provide recommendations on rent methodology and rates as of July 25, 2019. This rent methodology study was prepared in conformance with the Uniform Standards of Professional Appraisal Practice (U.S.P.A.P.), and the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute. I certify that I have no present or contemplated future interest in the property beyond this analysis. The appraiser has not performed any prior services regarding the subject within the previous three years of the study date. Thank you for the opportunity of submitting this rent methodology study. Respectfully submitted, The Doré Group, Inc. Lance W. Doré, MAI, FRICS President/CEO | CA-CA-AG002464 TABLE OF CONTENTS Executive Summary .............................................................................. Error! Bookmark not defined. Category 1 ........................................................................................................................................... 8 Category 2 ........................................................................................................................................... 8 Scope of Work ..................................................................................... Error! Bookmark not defined. Legal Concepts ..................................................................................... Error! Bookmark not defined. Introduction ...................................................................................................................................... 11 Choice of Laws .................................................................................................................................. 11 The Public Trust Doctrine .................................................................................................................. 11 Littoral (Lake) Boundaries ................................................................................................................. 14 Public Rights of Access to Use California Navigable Waters ............................................................ 16 Fogerty and Lyon, Tahoe Shorezone ................................................................................................ 20 Historical Benchmarks – CA State Lands Commission ..................................................................... 21 Previous Rulings Overview For SLC Benchmarks .............................................................................. 21 Alternatives ....................................................................................................................................... 22 Recommended Action (SLC).............................................................................................................. 28 Overview of Benchmarks – The Dore Group .................................................................................... 28 Public Trust and State’s Best Interests Analysis ............................................................................... 29 Methodology of Benchmarks ............................................................................................................ 34 Berth/Slip Rent .................................................................................................................................. 36 Conclusion ......................................................................................................................................... 42 Buoy Rent .......................................................................................................................................... 44 Category 1 – Review and Conclusion of SLC Benchmark Rate for Buoys ......................................... 47 Category 2 – Review and Conclusions of SLC Benchmark Rate Non-Water Use. ............................. 47 Regional Maps ..................................................................................... Error! Bookmark not defined. Tahoe Regional Planning Agency – TRPA .............................................. Error! Bookmark not defined. TRPA Shoreline Plan – 2019 .................................................................. Error! Bookmark not defined. SB 630, Pavley, California – Tahoe Regional Planning Agency ................ Error! Bookmark not defined. State Lands Commission Lease – Overview ........................................... Error! Bookmark not defined. Comments to the Standard Lease .................................................................................................. 55 Lake Tahoe Piers, Buoys and Uses - Representative Photographs ................................................... 57 Valuation Methodology – CA State Lands Commission.......................... Error! Bookmark not defined. Rent Method 1 – 9% of the Appraised Value of the Leased Land ........... Error! Bookmark not defined. Rent Method 2 – A Percentage of Annual Gross Income ....................... Error! Bookmark not defined. Rent Method 3 – Comparison to Rents for Other Similar Land or Facilities of the Appraised Value of the Leased Land ..................................................................... Error! Bookmark not defined. Rent Method 4 – 0.05 Per Diameter Ince Per Lineal Foot of Pipeline, Conduit, or Fiber Optic Cable .......................................................................................... Error! Bookmark not defined. Rent Method 5 – Benchmarks for Regions Where There are Large Concentrations of Similar Facilities ................................................................................... Error! Bookmark not defined. Rent Method 6 – For Forest Management Agreements: Rent May Constitute Enhancement of the Land's Value Resulting from the Use A Percentage of Annual Gross Income ......................... 76 Rent Method 7 – Other Such Methods or Information That are Based on Commonly Accepted Appraisal Practices and Principles ......................................... Error! Bookmark not defined. Submerged Land Valuation Methodology ........................................................................................ 76 Sales Comparison Approach – Land Valuation ................................................................................. 80 Category 2 – Conclusions of SLC Benchmark Rate Non-Water Use. ................................................ 95 Rent Method 8 – For Leases for a Recreational Pier or Buoy Rent Shall be Based on Local Conditions and Local Fair Annual Rental Values ............................................................................. 97 Summary ............................................................................................. Error! Bookmark not defined. Recommended Rent Estimate – Method 1 (Paired Sales) ................................................................ 98 Recommended Rent Estimate – Method 7 (Submerged Land) ........................................................ 99 Recommendations ............................................................................... Error! Bookmark not defined. Addenda ..................................................................................................................................... 103 Definitions ........................................................................................... Error! Bookmark not defined. California Code of Regulations – ..................................................................................................... 103 Lake Tahoe .......................................................................................... Error! Bookmark not defined. Location | Overview ........................................................................................................................ 108 Area Cities & Communities ............................................................................................................. 108 Transportation ................................................................................................................................ 110 Natural Characteristics .................................................................................................................... 110