On the Economic Value of Inholdings
by Seth Cagin
Jan 25, 2011 | 5885 views | 10 10 comments | 19 19 recommendations | email to a friend | print
I have called developer Tom Chapman a schmuck in print a couple of times. That’s not civil, and I won’t do it again. Sorry, Tom.

But I did it because I think his notoriety is justified. It strikes me as dishonorable to acquire private property surrounded by public land precisely in order to hold it for ransom.

Chapman has stated that he does this to represent the interests of folks who have owned inholdings but have been unable to realize much value from them. He does it because he believes in the sanctity of private property rights, most essentially the right to realize as much value as possible from property ownership.

Chapman is not alone in this. Many Americans believe that private property is the basis of American democracy, the very definition of freedom. Others believe that while private property may be a cornerstone of our society, the right to own property and do with it whatever you choose is not quite so absolute. We believe that there are other values that must be considered – the public interest – in the organization of a functional democracy.

This, indeed, is perhaps the biggest fault line in American politics. Where some see any imposition on private property rights as encroaching socialism and thus, obviously, wrong, others see reasonable constraints on private property rights to ensure that the public interest is also protected. Some of us don’t even mind if it’s called socialism.

So Chapman and I are simply on opposite sides of the great American political divide.

To his credit, Chapman has found a way to endow inholdings with far more economic value than what environmentalists and public land advocates have been willing to accord them. Those who cherish public lands have taken the position that inholdings, by and large, have little or no economic value because they aren’t developable. Money to protect open space was better spent elsewhere, they have believed, to protect land that really is threatened with undesirable development.

Most inholdings on federal land were created as patented mining claims by the obsolete Mining Law of 1872 (long overdue for repeal or a massive rewrite) to encourage mining. Mining today is not a viable industry in most of the West. So the inholdings really do have no economic value except to the degree that they can be threatened with development and thus held for ransom. That’s what Chapman has done in several instances before, and is doing now with inholdings in Bear Creek.

He has basically declared, “You environmentalists and users of public lands think these inholdings are worthless? Well, you have another think coming.”

Chapman has argued that the public, or preservationists, have had plenty of opportunities to purchase the inholdings over the years, but haven’t done it. He sure has a point there. When Telluride brutally debated and rejected the proposed Idarado annexation agreement almost a decade back, the anti-annexation forces argued, with clear success, that there was no need to approve the annexation, which they believed came with too much adverse impact, even though it would have transferred thousands of acres to the U.S. Forest Service, because those inholdings were not developable anyway.

Now Chapman has grabbed the heart of Bear Creek.

Even before Chapman entered the picture the Telluride community was gearing up for a classic Telluride showdown over a tentative proposal from the Telluride Ski & Golf Co. to open a portion of Bear Creek to lift-served skiing. Now, suddenly, both sides – pro lift-served skiing in BC and anti lift-served skiing in BC – have a new party to consider as the issue is engaged. This week Chapman dramatically upped the ante by suggesting not just one, but as many as five or six lifts in Upper Bear Creek.

Whatever else one might say about Chapman, the guy has an instinct for occupying center stage.

Having grabbed our attention, there is little likelihood that Chapman will back off now. He is suing the ski company for the right to plow the Telluride Trail and See Forever – which could at least theoretically all-but-destroy the ski area if he were to win. He is looking into San Miguel County’s High Country Zoning, which prohibits many development activities in the high country, except within the ski area boundaries, which is not included in the zone district. I’m no lawyer, but Chapman could find a sympathetic hearing in court if he gets that far and argues that the ski company was singled out for special treatment when the zone district was created. Why else would he be researching how the zone district was created? We may be hearing a lot about “spot zoning” and “takings.”

And so, suddenly, an individual with an axe to grind about private property rights, a dyed-in-the-wool conservative, has inserted himself into a central debate about the future of Telluride, a dyed-in-the-wool liberal community. It’s the sanctity of private property rights as foundational principle versus defending the public interest, which is also a principle; it’s right versus left: this could be the Valley Floor debate all over again, except this time around there will be no relatively easy out by way of simply condemning Chapman’s land. As with the Valley Floor debate, Chapman will have an advantage in that we on the public-interest side of the debate will disagree over what is best for the community and environment (lift-served skiing or not?), will likely disagree over what strategy to pursue to blunt Chapman (call his bluff? negotiate?) and won’t agree as to where we can afford to compromise, either (one lift, or five?).

Plus there’s the ski company at the middle of this conundrum, not to mention the U.S. Forest Service. With so much at stake for so many, it’s difficult to imagine a way out of this that is anything other than very messy.

Yes, Mr. Chapman has us right where he wants us. We may protest loudly and hope he’s bluffing, thinking wishfully that he is firing blanks and will be defeated at every turn. Nobody likes the idea of paying ransom, but buying Chapman out may prove to be the cheapest alternative.

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February 08, 2011
Is it impractical to condemn a public access corridor down through Bear Creek? Unlike the Valley Floor it would be a much smaller undertaking and while the value of the land rights taken would be disputed no doubt it would seem that recent purchases would be clear evidence of value?

For me, I am quite conservative and supportive of private property rights and small government in general. Here it seems to me that when you have a situation like this where private parties are buying land that has an historic public use and no practical value to them solely to create leverage for further profit there seems to be an ethical issue. Instead of buying the in-holding at a bargain and donating it for the public good it is the extreme opposite and condemnation in a case like this doesn't offend my sensibilities.

Of course maybe there is more to this story than I know and maybe the real issue here is who profits, the little guy or Telski. That would be different.

PS Some of these posts are very educational, my compliments to those people who care enough to publicize important facts on both sides of the issue!
February 02, 2011
Just a couple points of interest. ResponsibleFreePress implies that the land is leased and agrees if it were PRIVATE property owners of such lands could do a variety of things. There is some confusion as to what a patented mining claim actually is. The lands up there are private property. A patented mining claim is not a leased parcel of land, but is owned by an individual(s). There are many misconceptions about this being public lands, however a piece of land once patented has both surface and mineral rights combined and is a true piece of private property.

The person "YouDon'tSay?" states that these pieces of private property are actually a "bastard form of property" created from public lands, and that they are inholdings and as such they not to be conmsidered "normal pieces of land". The reality is that most of those claims were patented before 1905, the year the Forest Service came into being. They only became what has been called "inholdings" when an outside entity took the lands around them. The land in question was not the intruding piece of property, but the other way around. I ask if inholdings are to be abolished, so should the Forest Service be abolished for landlocking them in the first place.

To complicate this issue, consider that in excess of 100 past years there are multiple pieces of private property in the form of patented mining claims still up there. There has been a fair amount of rhetoric that these lands are worthless, but to some person(s) during this time, they have not been worthless. In fact for the past 100 years they have held value to a person(s), or they would not have paid the taxes on them and subsequently lost the land. Somebody knows they own these pieces of land and maintain the taxes.

Now consider that skiing has only been in the area for last 30'ish years, and somebody has managed to keep those lands for something other than skiing in excess of 70'ish years for some reason. There is a value perhaps only known to them, but it is their land. Remember it is their land to do so with as they wish, provided they still paid the taxes on it. The land clearly has value to those people. If they wanted it to be public lands, they would have donated it away. You may say that they are still worthless, but if mining claims are worthless, then why on the 17th of May 2007 did The Watch report this: "With very little fanfare, the Telluride Town Council this week authorized contracts for the purchase of the 117-acre Kentucky Placer for $1.4 million, ending a two-year process to acquire the land near the base of Bear Creek." A mining claim on the other end of area in question was purchased by the town for over a million dollars. Not trying to irritate people, but simply point out some incredible similarities as well as hypocritical thoughts and processes.

Do you remember the front side of the mountain on Coonskin? I can remember before skiing was there when the trees were in place, and the colors were rampant, I believe that crossed claims but bought up by the ski company at the time. I could be mistaken on that, but I know they bought claims on top.

So, how about be good neighbors and work with land owners first. Otherwise, it is going to be long fight for access to someone's land that you do not own. Just remember, many of those claims have been in the same family's for generations, a little respect is probably due to them.

January 26, 2011
An inholding is not a normal piece of property. It is a bastard form of property, created on PUBLIC LAND over 125 years ago for the express and only purpose of enabling mining. Since most were never used for mining and even those that were are no longer suitable for it, inholdings should simply be abolished - even if that required buying them out at some low amount. As Chapman proves, an inholding's only economic value is to take it hostage, using it to threaten to destroy the surrounding public lands and thus blackmail the public into buying it at an inflated price. At the very least we should enact a new state law stating that there is NO PENALTY for trespassing across an inholding.
January 26, 2011
Dearest Seppo,

I would agree with you if this was PRIVATE property- This is all of our property-public lands leased out for best use. Mining used to be best use for these lands -but how many mines are open and running in San miguel County ? For over thirty years the ski area also has been best use of public lands .

The problem is that we the tax payers and residents will be paying for this chess game and either way we loose.

Or maybe the forest service will make Telski and Chapman share-wouldnt that be precious ?
January 26, 2011
Mr. Seppo-

You make a great point about private property and the legal rights that are implied by the presence of the chain link fence that surrounds Yankee Stadium.

Yankee Stadium has forever locked its gates when not in use and posted signs and prosecuted trespassers.

Bear Creek is different under the gray area of the law ..I think it is called an adverse easement-basically, Bear Creek has been used for many years by the public and this creates an adverse easement subject to the interpretation of mitigating issues...one of them is that Bear Creek was "off limits" or closed by the sheriff some years back due to some injuries and dangerous rescues..so does this closure affect the right of trespassers to continue ...question of fact and legal interpretation. The same but alternate argument comes up with Mr. Chapman now seeking judgment on an easement that was abandoned years ago when mining stopped on his mining claim. Can he revive his right? The difference here is that it would appear that Mr. Chapman's right is recorded in the county records and is not subject to continuous adverse possession like the Bear Creek trespass easement.

This is my understanding of the law and I dont have a legal degree but simply managed corporate litigation for many years as a senior executive at a major investment firm.

The angst I think you hear about is how this chain of events could possibly have occurred..the broadcasting of intention to install a lift in BC for years starting with the avy studies and then the guide service and then the web page vote for a new lift on TSG site while it would appear that no one figured out that this Gold Hill mining claim and other mining claims were very powerful. It seems obvious that this is a pretty big surprise to everyone involved and should have been handled much differently so that the ski area would not find that a major part of its ski operation could be subject to winter use by the new mining company.

Reminds me of that Talking Head line "How did we get here" "that is not my (house) ski run"...

Anyhow, Yankee Stadium and Bear Creek only slightly resemble each other legally. Yankee Stadium is run by the books and nothing is left to chance...

January 26, 2011
I just don't get it, someone help me here. Why are people so angry that a landowner does not want you using their private lands. The only way in and out of the valley is to trespass across those lands. It might be a bummer that you are not able to use someone's land, but I cannot go to Yankee Stadium and play ball there just because I think it is an awesome place to play ball, it simply does not belong to me.
January 25, 2011
Ms. Saftler-it may be simple greed but it is the rule of law and that is a principle. Equal subjection to the law was written into our Constitution because in England the King and his court were not subject to the laws for plebes.

This is a great history lesson for all of us.

His profit (or your greed) is simply his motive.

He has everything to say about Bear Creek development; he has had the last word for now as he singlehandedly shut down the plans and dreams of the closest thing we have to a king in this town..the largest employer, taxpayer, economic kingpin...

The man is going to bend the BC bunch over his barrel and let them have it...reminds me of a movie starring Burt Reynolds..."squeal like a pig"..
January 25, 2011
Mr. Cagin-

Well thought out thesis.

I agree with you that "there are other values to be considered, the public interest,in the functioning of a democracy". I have come to see Mr. FaceOnMars extrapolations on the use of leased public lands by a ski area and no public input on the day pass pricing. Would you not agree that we need to increase tourism here and the only way to do is it get people to be influenced economically? Which entity can most affect tourism here in town? The entity using public land-should it not consider the public interest, too in its pricing?

Moreover, I see very little difference here in structure than using zoning laws to outlaw hot dog carts in the public plaza; hear me out on this..in both cases someone is using the law to line their pockets or support their real estate investments.

Telluride is at a crossroads here and now and it is for the better; Mr. Chapman proposes to line his pockets and teach us all a lesson about values.

We are going to see who is equal before the law.

This from a bully..using the great justice system as a teaching opportunity...it is only for our benefit and in the end though, Telski will get back into BC, Chapman will move on and the rest of us will just be witnesses to one of the great real estate power plays of our time.

See you on 9!

January 25, 2011
It is simple greed. No principle involved. Chapman threatens to sue the Forest Circus and gets that entity to cuts off access from the ski area for thousands of people and then sues for access across the ski area? He is a hypocrite and a bully and a blackmailer. Mining "claims" used to hold a community and its economy hostage is unconscionable. Who asked him to plan Bear Creek for us, anyway? Who wants a series of people mover lifts in Bear Creek, anyway? What does his "plan" for Bear Creek have to do with property rights, anyway? This is not a property rights issue. We have Planning Commissions and a legal system that arbitrate that issue. Anyhow, property rights on a mining claim should be for mining only and should extinguish if not used after 10 years. Don't take sides with this guy. Any discussions we have about lifts in Bear Creek is between us and the Forest Service and the Ski Area and the County and the Town. He is trying to distract us while bending us over one of his barrels. Don't let him trap you in his greedy web.
January 25, 2011
Well-written series, Seth. It's clearly going to be a messy battle, fought over idealogical points, but underneath, I have to believe it's about the money to be gained.

Todd Brown