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[Federal Register: November 20, 2008 (Volume 73, Number 225)]
[Rules and Regulations]
[Page 70569-70581]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20no08-26]
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Part V
Department of Education
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34 CFR Part 222
Impact Aid Programs; Final Rule
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DEPARTMENT OF EDUCATION
34 CFR Part 222
RIN 1810-AB00
[Docket ID: ED-2008-OESE-0008]
Impact Aid Programs
AGENCY: Office of Elementary and Secondary Education, Department of
Education.
ACTION: Final regulations.
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SUMMARY: The Secretary amends regulations governing the Impact Aid
program under Title VIII of the Elementary and Secondary Education Act
of 1965 (Act), as amended by the No Child Left Behind Act of 2001. The
program, in general, provides assistance for maintenance and operations
costs to local educational agencies (LEAs) that are affected by Federal
activities. These amended regulations are necessary to clarify and
improve the administration of payments under section 8002 of the Act
relating to the Federal acquisition of real property.
DATES: These regulations are effective December 22, 2008. However,
affected parties do not have to comply with the information collection
requirements in Sec. 222.23 until the Department of Education
publishes in the Federal Register the control number assigned by the
Office of Management and Budget (OMB) to these information collection
requirements. Publication of the control number notifies the public
that OMB has approved these information collection requirements under
the Paperwork Reduction Act of 1995.
FOR FURTHER INFORMATION CONTACT: Catherine Schagh, Director, Impact Aid
Program, U.S. Department of Education, 400 Maryland Avenue, SW., room
3E105, Washington, DC 20202-6244. Telephone: (202) 260-3858 or via the
Internet, at: Impact.Aid@ed.gov.
If you use a telecommunications device for the deaf (TDD), you may
call the Federal Relay Service (FRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the contact person listed in the preceding
paragraph.
SUPPLEMENTARY INFORMATION: On June 2, 2008, the Secretary published a
notice of proposed rulemaking (NPRM) in the Federal Register (73 FR
31592) to amend the regulations implementing the Payments for Federal
Property portion of the Impact Aid program. The Payments for Federal
Property portion of the Impact Aid program is authorized under section
8002 of the Elementary and Secondary Education Act of 1965 (Act), as
amended by the No Child Left Behind Act of 2001. Current regulations
implementing the program authorized under section 8002 are found in 34
CFR 222.20 through 222.23. In the preamble to the NPRM, the Secretary
discussed on pages 31593-31595 the major changes proposed for Sec.
222.21, concerning how an LEA establishes eligibility for section 8002
payments, and the major changes proposed for Sec. 222.23, concerning
how a local official determines an aggregate estimated assessed value
(EAV) for the eligible Federal property upon which section 8002
payments are based.
Analysis of Comments and Changes
In response to the Secretary's invitation in the NPRM, thirty-six
parties submitted comments on the proposed regulations. In general,
except as described below, the comments supported the proposed
regulations or did not oppose them. An analysis of the comments and of
the changes in the regulations since publication of the NPRM follows.
We group major issues according to subject. We discuss other
substantive issues under the sections of the regulations to which they
pertain. Generally, we do not address technical and other minor changes
or suggested changes the Secretary is not authorized to make under
applicable law.
Requirements That a Local Educational Agency Must Meet Concerning
Federal Acquisition of Real Property Within the Local Educational
Agency (Sec. 222.21)
Comment: Nearly every commenter expressed support for the proposal
to expand the scope of records upon which the Secretary bases
determinations and redeterminations of eligibility under section
8002(a)(1) of the Act. We received no comments that opposed it.
Discussion: The Secretary appreciates the commenters' support. The
regulations will provide greater flexibility to applicants in
documenting their eligibility for assistance under section 8002 of the
Act.
Changes: None.
Non-Availability of Adjacent Taxable Land (Sec. 222.23)
Comment: One commenter expressed concerns about proposed Sec.
222.23 insofar as this section provides that the EAV of eligible
Federal property is based on adjacent taxable property. The commenter
asserted that there are not suitable adjacent taxable properties in the
commenter's LEA, due to the prevalence of tax-exempt property. As a
result, the commenter further asserted that, with regard to the LEA in
question, the proposed general method for determining EAV provided for
in Sec. 222.23 is not feasible.
Discussion: The proposed regulations anticipated cases in which
taxable property close to eligible Federal property or within a
particular LEA might not be available. Accordingly, proposed Sec.
222.23(e)(1)(iii), which defines adjacent properties, allowed the use
of taxable properties outside the boundaries of the LEA or beyond the
distance from the eligible Federal property specified in the definition
in extremely rare circumstances determined by the Secretary. The
circumstances described by the commenter, when there are no suitable
adjacent taxable properties within the LEA that could be used to
determine the EAV of eligible Federal property, if verified, would
warrant a determination by the Secretary that ``extremely rare
circumstances'' exist so that the exception in Sec. 222.23(e)(1)(iii)
would apply and more distant properties could be used.
The Secretary is aware of other similar circumstances in which all
of the waterfront or oceanfront property within an LEA is located on
the eligible Federal property and there is no comparable taxable
waterfront or oceanfront property in the LEA. If the Secretary
determines that such a situation exists, the Secretary would invoke
Sec. 222.23(e)(1)(iii), upon request by the LEA, to permit the use of
appropriate waterfront or oceanfront properties located in another LEA.
The Secretary is amending the definition of adjacent to provide
examples of situations that would be considered extremely rare
circumstances and might warrant the use of more distant adjacent
taxable properties.
Changes: We have revised Sec. 222.23(e)(1)(iii) to provide
examples of some extremely rare circumstances that might warrant the
use of adjacent taxable properties more than two miles from the
eligible Federal property or outside of the LEA.
Imputing a Non-Assessed or Tax-Exempt Portion of Eligible Federal
Property (Sec. 222.23(C)(1)(I))
Comment: Many comments expressed strong support for the general
requirement in the proposed regulations that local officials allocate a
proportion of the eligible Federal property acres in each usage
category for expected non-assessed or tax-exempt uses. None opposed it.
In the NPRM, the Secretary stated that she was particularly
interested in comments related to whether it would be appropriate to
establish a standard
[[Page 70571]]
proportion for each use category of eligible Federal property that
would be allocated to anticipated non-assessed or tax-exempt uses and,
if so, what a reasonable standard proportion would be. In response to
the Secretary's query, most commenters opposed the idea of establishing
a standard proportion, urging instead that the local official should
rely on his or her expert knowledge of the area and of the eligible
Federal property in making the allocation. One commenter requested that
the Department provide guidelines about how to determine the proportion
of eligible Federal property that likely would be exempt from local
real property taxes.
Another commenter noted that the list of non-assessed or tax-exempt
uses in proposed Sec. 222.23(c)(1)(i) is not exhaustive. The same
commenter noted that the failure to allocate a proportion of the
eligible Federal property acres in each usage category for expected
non-assessed or tax-exempt uses would result in the gross overstatement
of the estimated assessed value. That commenter also believed that in
arriving at a percentage to be used in allocating non-assessed and tax-
exempt uses to the eligible Federal property, the local official would
be looking at the prevalence of those uses within the boundaries of a
one-mile perimeter of the eligible Federal property.
Discussion: Based upon the strong opposition expressed in the
comments to the idea of establishing a standard proportion for non-
assessed or tax-exempt uses, and in light of the widely divergent
circumstances from locality to locality, the Secretary has decided to
retain the approach in the proposed regulations of relying on the local
official's expert knowledge of the area and of the eligible Federal
property in making the allocation. Additionally, we have decided not to
issue specific methodological guidelines on how local officials must
make this determination. We will monitor the implementation of this new
regulatory requirement to determine whether there is a need for further
elaboration in order to assure consistent practice.
The Secretary acknowledges that the regulations do not contain an
exhaustive list of non-assessed or tax-exempt uses. The words ``such
as'' in the proposed regulation were meant to convey that the
allocation should include any non-assessed or tax-exempt uses common in
the area, not just those enumerated in the regulations. All of the non-
assessed or tax-exempt uses common to the tax jurisdiction(s) should be
considered by the local official in making the allocation.
The Secretary agrees that the failure to allocate a proportion of
the eligible Federal property acres in each usage category for expected
non-assessed or tax-exempt uses would result in the overstatement of
the estimated assessed value. The regulations are intended to prevent
such overstatement by ensuring that non-exempt or non-assessed uses are
ascribed to a portion of eligible Federal property.
The Secretary disagrees with the commenter who stated that the
percentage used to allocate a proportion of eligible Federal property
to non-assessed or tax-exempt uses should be based on the property
within a one-mile perimeter of the eligible Federal property. The
Secretary believes that use of the tax jurisdiction(s) as a whole is a
more suitable basis for projecting the non-assessed and tax-exempt uses
likely to occur on the eligible Federal property should it revert to
private ownership. We have revised Sec. 222.23(c)(1)(i) to clarify
this point.
Changes: Section 222.23(c)(1)(i) has been amended to specify that
the local official bases non-assessed or tax-exempt proportions for the
Federal property on the actual non-assessed or tax-exempt uses for each
category in the entire tax jurisdiction(s) where the selected taxable
adjacent properties are located.
Minimum Number of Adjacent Taxable Properties (Sec. 222.23(c)(2)(i))
Comment: Many comments supported the requirement in the proposed
regulations for local officials to use a minimum sample of ten adjacent
taxable properties for each use category. However, many commenters
objected to the proposal requiring a local official to replicate the
property with the lowest per-acre value of the selected adjacent
taxable properties as many times as necessary to reach ten values when
at least three but fewer than ten taxable properties are selected.
The commenters argued that the average value of the selected
adjacent taxable properties should be used in lieu of the lowest value,
because using the lowest value would artificially deflate the estimated
value of the eligible Federal property while the average value would
more accurately reflect the value of the eligible Federal property.
Some commenters stated that the proposed use of the lowest value would
be a hardship on rural districts.
One commenter supported the use of the lowest-value taxable
property as the basis for replication because, according to the
commenter, this value represents a truer indication of an estimated
value for the Federal property given limitations of physical
adaptability, legal permissibility, and financial feasibility.
Moreover, according to this commenter, the inability to obtain ten
adjacent taxable properties would be indicative of other economic
factors at play in the area, such that the use of the lowest value for
replication is appropriate. The commenter further asserted that by
basing replication on the lowest value, the proposed regulations were
taking the calculations away from a true highest and best use
methodology.
Discussion: In setting the lowest per-acre value as the basis for
replication to reach ten properties, the Secretary's intent was to
create a strong incentive for local officials to perform an exhaustive
search for taxable adjacent properties before relying on the
alternative replication approach. Accordingly, we do not agree with the
suggestion that the average value of the selected adjacent taxable
properties should be used as the basis for replication. However, as
noted elsewhere in this preamble, we are revising the regulations to
increase, from one mile to two miles, the area within which adjacent
taxable properties may be selected. This change should significantly
reduce the number of cases in which replication will be necessary.
As described elsewhere in this preamble in the discussion of the
limitation on the use of recent sales (Sec. 222.23(d)(2)(i)), contrary
to the comment that using the lowest value as the basis for replication
would artificially deflate the value of the eligible Federal
property,these final regulations comport with the statutory requirement
that the aggregate assessed value of eligible Federal property be
determined on the basis of the highest and best use of adjacent
property. This requirement is implemented when the local official
categorizes and allocates the expected uses of eligible Federal
property through a consideration of the highest and best uses of the
adjacent taxable properties.
Finally, we have revised Sec. 222.23(c)(2)(i) to specify that in
those extremely rare circumstances in which the Secretary authorizes a
local official to use fewer than three adjacent taxable properties to
establish the base value for eligible Federal property, the average
per-acre value of the selected adjacent property or properties is to be
used in lieu of replication. An example of such ``extremely rare
circumstances'' has also been added to the regulations.
Changes: Section 222.23(c)(2)(i) has been revised to specify that
the Secretary may permit the local official
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to select fewer than three parcels in a tax classification if doing so
is determined by the Secretary to be necessary and reasonable and there
is an insufficient number of adjacent taxable parcels to replicate. The
revised regulations further provide that in these extremely rare
circumstances, the local official establishes the base value of the
eligible Federal property on the average per-acre value of the selected
adjacent property or properties. We have also added to the regulations
an example of the use of fewer than three adjacent taxable properties
in extremely rare circumstances.
Three-Year Cycle (Sec. 222.23(d)(1))
Comment: Nearly all of the commenters supported the establishment
of a three-year cycle for the local official to determine the EAV for
the Federal property. Under the proposed regulations, the local
official establishes the base value for eligible Federal property by
selecting adjacent taxable properties in a base year and then updating
the values of those adjacent taxable properties in the two succeeding
years.
One commenter suggested that the three-year cycle moves the EAV
away from the common definition of highest and best use, presumably on
the assumption that it slows increases in the EAV in the two non-base
years in which the selected adjacent taxable properties must be used
again. The same commenter questioned whether the foreclosure of a
selected taxable property would be among the circumstances under which
the regulations would permit the substitution of a new selected taxable
property in one of the two years succeeding the base year.
Discussion: The three-year cycle does not conflict with the concept
of highest and best use because this concept is implemented through the
local official's identification of, and proportions for, the expected-
use categories for the Federal property. The assumption that it slows
growth in the EAV in the non-base years is also not accurate since,
under the regulations, the values and acreages of the selected adjacent
taxable properties are updated in the non-base years.
Under Sec. 222.23(d)(1)(iii), the substitution of an adjacent
taxable property in a non-base year is appropriate only in the event of
a change in assessment classification, a change to tax-exempt status,
or a change in the character of the property. A foreclosure does not
change the essential character of a property, although it may affect
its value. Absent an accompanying change in assessment classification
or change to tax-exempt status, foreclosure alone would not justify a
substitution of an adjacent taxable property unless it could be shown
that the character of the property has changed.
Changes: None.
Limitation on the Use of Recent Sales (Sec. 222.23(d)(2)(i))
Comment: Nearly all of the commenters supported the provision in
the proposed regulations that would limit the use of recent sales in
the selection of adjacent taxable properties. One commenter, however,
asserted that the proposed limitation would be contrary to the ordinary
understanding of highest and best use assessed value and a step in the
direction of current actual assessed values.
The same commenter questioned the basis for the numerator and
denominator in the proportion governing the maximum permissible number
of adjacent taxable properties that are recent sales. The commenter
suggested three possible alternatives: (1) All recent sales of taxable
properties for the LEA divided by all taxable properties in the LEA;
(2) all recent sales of taxable properties within a one-mile radius of
the eligible Federal property divided by all taxable property within
that radius; or (3) all recent sales of taxable properties within the
local tax areas of the sample group divided by all taxable property in
those areas.
The commenter asserted that the first option would be very
difficult because hundreds of thousands of parcels within the LEA would
have to be examined. Finally, the commenter questioned whether all
parcels would be of equal weight, regardless of size, in calculating
the limitation on the use of recent sales.
Discussion: The limitation on the use of recent sales was proposed
because, under the existing regulations, some LEAs have selected
different adjacent taxable properties each year consisting exclusively
of new sales. This resulted in disparities among LEAs with respect to
the relative rates of annual section 8002 maximum payment increases.
Moreover, the preamble to the NPRM noted that it is unlikely that an
eligible Federal property would change hands in its entirety every year
if it were on the tax rolls (73 FR 31595). The virtually unanimous
support by the commenters for the limit on the use of recent sales
confirms the seriousness of the problem.
As explained in the preamble to the NPRM (73 FR 31595), the
limitation on the use of adjacent taxable properties that are recent
sales does not contravene the statutory requirement in section
8002(b)(3) that the aggregate assessed value of eligible Federal
property be determined on the basis of the highest and best use of
adjacent property. Under the final regulations, the local official
takes into consideration the highest and best uses of the adjacent
taxable properties in categorizing and allocating the expected uses of
eligible Federal property, a crucial step in arriving at an aggregate
assessed value.
Limiting the extent to which adjacent taxable properties used in
calculating base values may be recent sales later on in the process
does not negate the use of the highest and best use concept in the
earlier stage. The aggregate assessed value obtained at the conclusion
of the process is based upon highest and best use, by virtue of the
application of that concept in categorizing and allocating the expected
uses of eligible Federal property.
As Examples 4 and 5 accompanying the final regulations make clear,
the numerator and denominator of the proportion used to determine the
number of selected adjacent taxable properties that may be recent sales
are based upon sales in the relevant tax jurisdiction(s). To prevent
any possible further confusion, we are clarifying Sec. 222.23(d)(2)(i)
to specify that it is in fact the tax jurisdiction that is used to
identify taxable parcels in a category and recent sales in that
category.
The comment regarding the necessity for examining hundreds of
thousands of parcels is incorrect. Under the regulations, no
examination of individual parcels is needed with respect to the
limitation on recent sales; all that is necessary for each relevant
category is the number of properties in that category that are recent
sales and the total number of properties in that category within the
taxing jurisdiction.
In the preamble to the NPRM, the Secretary requested comments on
the availability of the data necessary to determine the number of
selected adjacent taxable properties that may be recent sales (73 FR
31592). While no commenter specifically addressed this point, as
stated, nearly all of the commenters supported the proposed limitation
on the use of recent sales.
The proportion used to limit the use of adjacent taxable properties
that are recent sales is unweighted. Each property counts equally
regardless of size.
Changes: We have revised Sec. 222.23(d)(2)(i) to specify that the
numerator and denominator are based on the numbers of properties in the
relevant tax jurisdiction(s).
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Definition of ``Adjacent'' (Sec. 222.23(e)(1))
Comment: Many commenters objected to the proposed definition of
adjacent, which is used to describe the taxable properties used in
deriving the EAV of eligible Federal property. Most commenters objected
to the requirement that, among other things, adjacent properties be
within one mile of the perimeter of the Federal property. The
commenters preferred a wider range for the selection of adjacent
taxable properties.
Some commenters said that the proposed restriction creates
difficulties for rural LEAs. On the other hand, one LEA representative
commented that the proposed one-mile limitation is reasonable, but that
using a range of more than one mile would raise concerns about the
validity of the EAV of the eligible Federal property.
That commenter expressed concern that the Department did not
provide any examples of what circumstances might qualify as extremely
rare circumstances justifying the use of adjacent taxable properties
beyond the one-mile range. The commenter queried whether prior approval
would be necessary before an LEA exceeds the specified range and how
information about decisions of this nature will be communicated to
other applicants.
Discussion: Under proposed Sec. 222.23(e)(1), adjacent was defined
to mean next to or close to the eligible Federal property with the
specification that in most cases it means the closest taxable parcels
in the LEA and that more distant ones could be used only where the
Secretary finds it to be necessary and reasonable. Moreover, taxable
properties further than one mile from the perimeter of the eligible
Federal property could be used only in extremely rare circumstances
determined by the Secretary.
Based on the volume of comments stating that a range of one mile
from the perimeter of eligible Federal property would be inadequate for
the selection of taxable properties, we have decided that it is
appropriate to increase the maximum distance to no farther than two
miles from the perimeter. Only when the Secretary determines that
``extremely rare circumstances'' exist may more distant taxable
properties be used. Given that the final regulations also require the
use of the closest taxable properties in most cases, we do not agree
with the single commenter that increasing the permissible range would
give rise to significant concern about the EAV of eligible Federal
property derived on that basis.
With respect to whether prior approval for the use of more distant
taxable properties is required, Sec. 222.23(e)(1)(iii) of the
regulations provides that the exception permitting the use of more
distant properties applies only if the Secretary determines that
extremely rare circumstances exist. Accordingly, LEAs whose local
officials cannot locate taxable properties within the two-mile range
should not unilaterally use more distant taxable properties, but should
instead contact the Impact Aid Program for assistance. In addition, the
Impact Aid Program will provide all applicants with regular updates on
the implementation of these new regulatory requirements.
Changes: We have revised the definition of adjacent in Sec.
222.23(e)(1)(iii) to provide that the Secretary considers the term to
mean properties more than two miles from the perimeter of eligible
Federal property or outside of the LEA only in extremely rare
circumstances determined by the Secretary. We have also added examples
of extremely rare circumstances, including a description of the process
for obtaining approval for an exception.
Definition of ``highest and best use'' (Sec. 222.23(e)(2)(i))
Comment: One commenter supported the provision that, in considering
the highest and best use of adjacent taxable property, the local
official may consider the most developed and profitable use for which
it is adaptable if that use is legally permissible and financially
feasible and for which there is a need or demand in the near future.
However, the commenter contrasted this language in proposed Sec.
222.23(e)(2)(i) with the language in proposed Sec.
222.23(e)(2)(ii)(B), which states that the local official must consider
the extent to which the eligible Federal property is physically
adaptable to the expected uses and there is a need for those uses. The
commenter suggested that there be a uniform standard with respect to
these two provisions and expressed a preference that both provisions
should be mandatory.
The same commenter queried whether, subject to the limitation on
the use of adjacent taxable properties that are recent sales, given the
emphasis in the law on highest and best use, the local official should
select only the highest economically developed adjacent taxable
properties, provided that they are physically adaptable, legally
permissible and financially feasible.
Discussion: The highest and best use of the adjacent taxable
properties is the basis for categorizing and allocating the expected
uses of eligible Federal property. The definition in the regulations of
the term highest and best use seeks to ensure the reasonableness of the
expected uses of eligible Federal property in two ways. First, it
places certain limitations on the local official's selection of
adjacent taxable parcels. Second, it requires the local official to
examine the reasonableness of the expected uses the official allocates
to the eligible Federal property.
The latter requirement (Sec. 222.23(e)(2)(ii)(C)) is expressed as
a ``must''; that is, the local official must consider the extent to
which the eligible Federal property is physically adaptable to the
expected uses and there is a need for those uses. The former
requirement (Sec. 222.23(e)(2)(i)(A)), which is applicable to adjacent
taxable properties, is expressed as a ``may'' because it only applies
in those cases where a local official elects to consider the most
developed and profitable use for which an adjacent property is
physically adaptable. However, the intent of the proposal was that if
the local official elects to consider the most developed and profitable
use for which it is adaptable, the local official may only do so if
that use is legally permissible and financially feasible and there is a
need or demand for that use in the near future. We have revised the
regulations in Sec. 222.23(e)(2)(i)(A) to clarify this point.
All of the limitations contained in the definition of highest and
best use are mandatory. Any categorization and allocation of expected
uses of eligible property that are based on uses of adjacent property
that are unlawful, financially infeasible, or not in demand, fail to
conform to the definition of highest and best use and do not comply
with the regulations. Any categorization and allocation of expected
uses of eligible property that are based on uses of adjacent property
that are speculative or remote likewise fail to conform to the
definition of highest and best use and do not comply with the
regulations. Any categorization and allocation of expected uses of
eligible Federal property for which the Federal property is not
physically adaptable or for which there is no demand in the near future
are not in accord with the regulations.
Accordingly, with respect to the second comment, the local official
must do more than assure that the uses of the adjacent taxable
properties are physically adaptable, legally permissible, and
financially feasible. He or she must assure that the potential uses
considered are not speculative or remote. He or she must also consider,
under Sec. 222.23(e)(2)(ii)(B), whether the
[[Page 70574]]
eligible Federal property is physically adaptable for the expected uses
and whether there is a need for those uses. Moreover, as noted in
Example 8, the local official should strive to use a range of
properties generally representative of what surrounds the eligible
Federal property (e.g., small properties, large properties, improved
properties broadly representative of the housing, industrial, or
agricultural building market, and unimproved properties in those
categories).
In light of those principles, it likely would not be reasonable,
for example, for a local official to base the valuation of a 100,000-
acre military installation on ten half-acre residential properties with
$500,000 houses on them. Among other things, the immediate demand in
the area for another 200,000 properties of that type would be
considered speculative and remote.
Changes: Section Sec. 222.23(e)(2)(i) has been revised to provide
that, in considering the highest and best use of adjacent taxable
property, the local official may consider the most developed and
profitable use for which it is adaptable only if that use is legally
permissible and financially feasible and there is a need or demand for
it in the near future.
Executive Order 12866
Under Executive Order 12866, the Secretary must determine whether
this regulatory action is ``significant'' and therefore subject to the
requirements of the Executive order and review by OMB. Section 3(f) of
Executive Order 12866 defines a ``significant regulatory action'' as an
action likely to result in a rule that may (1) have an annual effect on
the economy of $100 million or more, or adversely affect a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments, or communities
in a material way (also referred to as an ``economically significant''
rule); (2) create serious inconsistency or otherwise interfere with an
action taken or planned by another agency; (3) materially alter the
budgetary impacts of entitlement grants, user fees, or loan programs or
the rights and obligations of recipients thereof; or (4) create novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive order. The
Secretary has determined that this regulatory action is not significant
under the Executive order.
We have reviewed these final regulations in accordance with
Executive Order 12866. Under the terms of the order we have assessed
the potential costs and benefits of this regulatory action.
The potential costs associated with the final regulations are those
resulting from statutory requirements and those we have determined to
be necessary for administering this program effectively and
efficiently. In assessing the potential costs and benefits--both
quantitative and qualitative--of these final regulations, we have
determined that the benefits of the regulations justify the costs. We
have also determined that this regulatory action does not unduly
interfere with State, local, and tribal governments in the exercise of
their governmental functions.
Summary of Potential Costs and Benefits
In general, the final regulations will provide more specificity
with respect to local officials' selection of adjacent parcels upon
which they base their valuation of the Federal property. These more
specific rules generally will reduce burden by eliminating the need for
lengthy consultations with Department staff, multiple revisions to
valuation submissions, and application amendments. Although one of the
regulatory changes would require local officials to select a minimum
number (generally 10) of properties on which to base the valuation of
the Federal property and, therefore, may require some local officials
to add more properties than they currently are using, any resulting
increase in the local official's time for this task is offset by the
accompanying regulatory change to reduce the selection cycle from every
year to once every three years.
These final regulations will provide the following benefits for
section 8002 applicants: Greater uniformity in how local officials
value the eligible Federal property in each of their jurisdictions;
elimination of inequitable inflation in the value of the eligible
Federal property; and greater reliability and consistency in the
valuation process nationwide.
Paperwork Reduction Act of 1995
Section 222.23 contains information collection requirements related
to the submission of an applicant's section 8002 application. The
section 8002 application form and the regulations that require it (34
CFR 222.3) are approved under OMB number 1810-0036, with an expiration
date of January 31, 2009. Table 1 of that approved application (Tax
Assessor's Valuation of Section 8002-eligible Federal Property)
requires each applicant LEA's tax assessment official (local official)
to certify the accuracy and completeness of certain information about
the eligible section 8002 property, including its aggregate EAV as
required by section 8002(b)(3) of the ESEA, and summary information
upon which that value was derived. We anticipate OMB approval of a
revised collection reflecting these requirements following the
publication of the final regulations.
Section 222.23 makes several changes to the information that the
local official must obtain and use in determining the aggregate EAV of
the Federal property. However, for the reasons explained below, the
Secretary believes that these changes do not result in an increase in
the paperwork collection burden.
Sections 222.23(a)(3) and (c)(1) require local officials to
identify the taxable use portions of the eligible Federal property by
excluding a proportion of each expected use category that the local
official would allocate to accommodate anticipated non-assessed or tax-
exempt uses. We proposed this change to avoid overstating the aggregate
EAV of the eligible Federal property upon which section 8002 payments
are based, which otherwise might occur if a portion of the property is
included that likely would remain exempt from real property taxation if
no longer federally owned.
In addition, Section 222.23(c)(2)(i) requires local officials to
obtain a minimum sample size of 10 adjacent properties for each type of
property, rather than using a lesser number of properties. We proposed
this change to standardize the minimum sample size and provide greater
consistency and reliability in payments. Federal property valuations
must be established as consistently as possible to achieve equity in
LEAs' payments, which are based in part upon those valuations and are
mutually dependent upon one another due to lack of full funding for the
program.
Although the change in the minimum sample size may increase the
burden for some LEAs, it will reduce or have no effect on the
collection burden of others that currently obtain a higher number of
sample properties. In any event, the Secretary believes that both of
these changes will be offset by the following simultaneous burden
reductions: (1) In Sec. 222.23(d)(1), moving from an annual to a
three-year sample selection cycle; and (2) in Sec. 222.23(d)(2),
limiting the number of recent sales that a local official may select in
each base selection year, which will take far less time than searching
for all new, appropriate, recent sales every year.
[[Page 70575]]
Assessment of Educational Impact
In the NPRM, and in accordance with section 411 of the General
Education Provisions Act, 20 U.S.C. 1221e-4, we requested comments on
whether the proposed regulations would require transmission of
information that any other agency or authority of the United States
gathers or makes available.
Based on the response to the NPRM and on our review, we have
determined that these final regulations do not require transmission of
information that any other agency or authority of the United States
gathers or makes available.
Electronic Access to This Document
You may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at the following site:
http://www.ed.gov/legislation/FedRegister.
To use PDF, you must have Adobe Acrobat Reader, which is available
free at this site. If you have questions about using PDF, call the U.S.
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in
the Washington, DC, area at (202) 512-1530.
You may also view this document in text or PDF at the following
site: http://www.ed.gov/programs/8002/legislation.html.
Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at: http://
www.access.gpo.gov/nara/index.html.
(Catalog of Federal Domestic Assistance Number 84.041, Impact Aid-
Maintenance and Operations)
List of Subjects in 34 CFR Part 222
Education, Education of children with disabilities, Educational
facilities, Elementary and secondary education, Federally affected
areas, Grant programs--education, Indians--education, Public housing,
Reports and recordkeeping requirements, School construction, Schools.
Dated: November 13, 2008.
Kerri L. Briggs,
Assistant Secretary for Elementary and Secondary Education.
0
For the reasons discussed in the preamble, the Secretary amends part
222 of title 34 of the Code of Federal Regulations as follows:
PART 222--IMPACT AID PROGRAMS
0
1. The authority citation for part 222 continues to read as follows:
Authority: 20 U.S.C. 7701-7714, unless otherwise noted.
0
2. Section 222.21 is amended by revising the introductory text in
paragraph (a), and revising paragraphs (d)(1) and (e) to read as
follows:
Sec. 222.21 What requirements must a local educational agency meet
concerning Federal acquisition of real property within the local
educational agency?
(a) For an LEA with an otherwise approvable application to be
eligible to receive financial assistance under section 8002 of the Act,
the LEA must meet the requirements in subpart A of this part and Sec.
222.22. In addition, unless otherwise provided by statute as meeting
the requirements in section 8002(a)(1)(C), the LEA must document--
* * * * *
(d) * * *
(1) For a new section 8002 applicant or newly acquired eligible
Federal property, only upon--
(i) Original records as of the time(s) of Federal acquisition of
real property, prepared by a legally authorized official, documenting
the assessed value of that real property;
(ii) Facsimiles, such as microfilm, or other reproductions of those
records; or
(iii) If the documents specified in paragraphs (d)(1)(i) and (ii)
are unavailable, other records that the Secretary determines to be
appropriate and reliable for establishing eligibility under section
8002(a)(1) of the Act, such as Federal agency records or local
historical records.
* * * * *
(e) The Secretary does not base the determination or
redetermination of an LEA's eligibility under this section upon
secondary documentation that is in the nature of an opinion, such as
estimates, certifications, or appraisals.
* * * * *
0
3. Section 222.23 is revised to read as follows:
Sec. 222.23 How does a local educational agency determine the
aggregate assessed value of its eligible Federal property for its
section 8002 payment?
(a) General. A local educational agency (LEA) determines the
aggregate assessed value of its eligible Federal property for its
section 8002 payment as follows:
(1) A local official who is responsible for assessing the value of
real property located in the jurisdiction of the LEA in order to levy a
property tax makes the determination of the section 8002 aggregate
assessed value, based on estimated assessed values (EAVs) for the
eligible Federal property in the jurisdiction.
(2) The local official first categorizes the types of expected uses
of the eligible Federal property in each Federal installation or area
(e.g., Federal forest) based on the highest and best uses of taxable
properties adjacent to the eligible Federal property (adjacent
properties), and allocates a portion of the acres of the eligible
Federal property to each of those expected uses, in accordance with
paragraph (b) of this section.
(3) For each category of expected use of the eligible Federal
property identified in accordance with paragraph (a)(2) of this section
for each Federal installation or area, the local official then
determines a base value in accordance with paragraphs (c) and (d) of
this section.
(4) The local official next determines a section 8002 EAV for each
category of expected use of the eligible Federal property in each
Federal installation or area. The official determines that EAV by
adjusting the base value for that category established in accordance
with paragraph (a)(3) of this section, by any percentage, ratio, index,
or other factor that the official would use to determine the assessed
value (as defined in Sec. 222.20) of the eligible Federal property to
generate local real property tax revenues for current expenditures if
that eligible Federal property were taxable. (This process is
illustrated in Example 8 and Table 8-2 at the end of this section.)
(5) The local official then determines a total section 8002 EAV for
each Federal installation or area in the LEA by adding together the
assessed values determined pursuant to paragraph (a)(4) of this section
for all property use categories of eligible Federal property in that
Federal installation or area.
(6) The local official determines a section 8002 aggregate assessed
value for the LEA as follows:
(i) If the LEA contains a single Federal installation or area with
eligible Federal property, the total section 8002 EAV determined
pursuant to paragraph (a)(5) of this section constitutes the section
8002 aggregate assessed value for the LEA.
(ii) If the LEA contains more than one Federal installation or area
with eligible Federal property, the local official calculates the
section 8002 aggregate assessed value for all of the eligible Federal
property in the LEA by adding together the section 8002 total EAVs
determined pursuant to paragraph (a)(5) of this section for all Federal
installations and areas containing eligible Federal property within the
LEA. (This process is illustrated in
[[Page 70576]]
Example 8 and Table 8-2 at the end of this section.)
(b) Categorizing expected uses. (1) The local official categorizes
the expected uses of the eligible Federal property, in accordance with
paragraph (a)(2) of this section, by--
(i) Identifying the tax assessment classifications that represent
the highest and best uses of the taxable adjacent property (e.g.,
residential, commercial, agricultural); and
(ii) Determining the relative proportions of taxable adjacent
properties, based on acreage, that are devoted to each of those tax
assessment classifications that represent the highest and best uses of
the taxable adjacent property (e.g., agricultural--50 percent;
residential--40 percent; commercial--10 percent).
(2) The local official then determines the allocation of each of
those expected uses to the eligible Federal property acres by
multiplying each of the proportions determined under paragraph
(b)(1)(ii) of this section by the total acres of the eligible Federal
property in that Federal installation or area.
(c) Determining the base value for expected use categories. The
local official determines a base value for each category of expected
use of the eligible Federal property in accordance with paragraph
(a)(3) of this section as follows:
(1) The local official first identifies the taxable-use portion of
the eligible Federal property acres in each expected use category as
follows:
(i) The local official allocates a proportion (percentage) of the
eligible Federal property acres identified for each expected use
category under paragraph (b)(2) of this section to expected non-
assessed or tax-exempt uses, such as public open space, schools,
churches, and roads. The local official bases these proportions on the
actual non-assessed or tax-exempt uses for each category of taxable
property in the entire tax jurisdiction(s) where the selected taxable
adjacent properties are located.
(ii) The local official then determines the number of acres
attributable to non-assessed or tax-exempt uses for each expected use
category by multiplying the non-assessed or tax-exempt proportions
identified in paragraph (c)(1)(i) of this section by the number of
acres in each expected-use category determined pursuant to paragraph
(b)(2) of this section.
Example 1 (Allocation of Proportion of Eligible Federal Property
to Non-Assessed or Tax-exempt Uses): The eligible Federal property
(1,000 acres) is surrounded by properties that are classified for
tax purposes according to their highest and best uses as residential
(40 percent) and agricultural (60 percent) property. For the
residential category (400 acres), the local official determines that
approximately 20 percent would be devoted to non-assessed or tax-
exempt uses, such as roads, parks, churches, and schools. The local
official multiplies that proportion (.20) by the number of eligible
Federal acres allocated to the residential category (400 acres) to
determine the number of eligible Federal acres (80 acres) that
likely would not be assessed for taxation or would be tax-exempt if
the Federal Government no longer owned that property, as illustrated
in the chart at the end of this example (Table 1-1). The local
official follows a similar process for the proportion of the
eligible Federal property the official allocated to agricultural
use.
Table 1-1--Proportion of Residential Category of Section 8002 Eligible
Federal Property Allocated to Non-Assessed or Tax-exempt Uses
------------------------------------------------------------------------
Eligible Federal
acres allocated
Allocated to expected use
proportion category (Col. 2
(percent) x acres in
expected use
category)
(1) (2) (3)
------------------------------------------------------------------------
Residential portion of eligible Federal property (400 acres)
------------------------------------------------------------------------
Allocated by local official for 20 80
non-assessed or tax-exempt uses..
Allocated for taxable residential 80 320
use..............................
-------------------------------------
Total......................... 100 400
------------------------------------------------------------------------
(iii) The local official then calculates the number of acres
attributable to taxable use for each expected use category by
subtracting the number of acres attributable to non-assessed or tax-
exempt uses determined under paragraph (c)(1)(ii) of this section
from the total number of acres of eligible Federal property in that
use category identified in paragraph (b)(2) of this section.
(2) For the taxable use portion determined under paragraph
(c)(1)(iii) of this section for each expected use category, the
local official then calculates a base value as follows:
(i) The local official selects from each expected use category
identified pursuant to paragraph (b)(1)(i) of this section a minimum
sample size of 10 taxable adjacent properties that represent the
highest and best uses of the taxable adjacent properties. The
official identifies the value that is recorded on the assessment
records for each selected taxable adjacent property before any
adjustment, ratio, percentage, or other factor is applied to
establish a taxable (assessed) value. If at least three but fewer
than 10 taxable adjacent properties are selected in an identified
use category, the local official calculates a per acre value for
each adjacent property and then identifies which of those properties
has the lowest per-acre value. The official replicates that adjacent
property's value and acreage as many times as needed until the
combination of actual and replicated adjacent properties reaches ten
in number. In extremely rare circumstances, the Secretary may permit
the local official to select fewer than three parcels in a tax
classification if doing so is determined by the Secretary to be
necessary and reasonable and there is an insufficient number of
adjacent taxable properties to replicate. In those extremely rare
circumstances, the local official establishes the base value of the
eligible Federal property using the average per acre value of the
selected adjacent property or properties.
Example 2a (Minimum Sample Size of Adjacent Properties): The
eligible Federal property is surrounded by properties that are
classified for tax purposes as residential, commercial, and
agricultural property. The local official selects at least 10
taxable adjacent parcels from each of the residential and
agricultural property classifications as the basis for valuing the
eligible Federal property.
In the commercial classification, however, only six taxable
adjacent properties are selected. The lowest per-acre-valued parcel,
Parcel A, is valued at $6,000 per acre. As illustrated in Table 2-1,
the local official selects all six of the commercial taxable
adjacent properties, and then replicates Parcel A's value and
acreage four more times to reach the minimum number of ten
properties for that classification.
[[Page 70577]]
Example 2b (Use of Fewer Than Three Adjacent Taxable Properties
in Extremely Rare Circumstances): There are three golf courses in an
LEA, one on eligible Federal property and the other two on taxable
property adjacent to the eligible Federal property. Under the local
tax classification scheme, there is a separate tax category for golf
courses. Since there are only two adjacent taxable properties in
that tax classification in the taxing jurisdiction, the LEA seeks
permission to establish the base value for the golf course on the
eligible Federal property using the average per-acre value of the
two adjacent taxable golf courses. After verifying the facts, the
Secretary determines that extremely rare circumstances exist within
the meaning of Sec. 222.23(c)(2)(i) and grants the LEA's request.
(ii) The local official then calculates an average per-acre
value for the taxable portion of each expected use category by
totaling the values (following application of any adjustment
factors, if relevant) and acres of the actual and any replicated
adjacent properties and then dividing the total value by the total
number of acres in those properties, as illustrated in the following
chart (Table 2-1).
Table 2-1--Average Per-Acre Value of Minimum Sample Size of Adjacent Properties
----------------------------------------------------------------------------------------------------------------
Selected adjacent properties-- Value per
commercial classification Value Acres acre
(1).................................... (2) (3) (4)
----------------------------------------------------------------------------------------------------------------
1...................... Parcel A............................... $150,000 25 $6,000
2...................... Parcel B............................... 1,200,000 30 40,000
3...................... Parcel C............................... 750,000 .25 3,000,000
4...................... Parcel D............................... 1,000,000 40 25,000
5...................... Parcel E............................... 500,000 5 100,000
6...................... Parcel F............................... 250,000 .5 500,000
7...................... Replicated Parcel A.................... 150,000 25 6,000
8...................... Replicated Parcel A.................... 150,000 25 6,000
9...................... Replicated Parcel A.................... 150,000 25 6,000
10..................... Replicated Parcel A.................... 150,000 25 6,000
----------------------------------------------------------------------------------------
Total............................... 4,450,000 200.75 NA
----------------------------------------------------------------------------------------
Average value/acre
(TOTAL Col. 2/TOTAL Col. 3) 22,166.87
----------------------------------------------------------------------------------------------------------------
(iii) The local official then multiplies the average per-acre
value calculated under paragraph (c)(2)(ii) of this section by the
number of acres of eligible Federal property in the taxable portion
of that expected-use category, determined in accordance with
paragraph (b)(2) of this section to calculate the base value for
that category.
(d) Additional procedures for determining base values. The local
official applies the following additional procedures in determining
a base value for each category of expected use of the eligible
Federal property, in accordance with paragraph (a)(3) of this
section:
(1) The local official determines base values on a three-year
cycle, as follows:
(i) The local official allocates expected uses to the eligible
Federal property in accordance with paragraph (b)(2) of this section
and selects taxable adjacent properties in accordance with paragraph
(c)(2)(i) of this section once every three years (base year).
(ii) For each of the following two application years, the local
official uses the same allocation of expected uses of the eligible
Federal property and the same taxable adjacent parcels selected for
the base year, but updates the values and acreages of the selected
taxable adjacent parcels.
(iii) If a previously selected taxable adjacent property becomes
unsuitable for determining the base value for the expected-use
category because that property has changed assessment
classification, become tax-exempt, or undergone a change in
character from the time that the property was selected for the base
year, the local official substitutes a similar taxable adjacent
property from the same expected-use category (assessment
classification) in accordance with the requirements in paragraph
(c)(2)(i) of this section.
Example 3 (Three-Year Cycle for Selected Adjacent Properties):
For the fiscal year (FY) 2010 section 8002 application, the local
official selects 15 residential taxable adjacent properties to use
as the basis for valuing a portion of the eligible Federal property,
and provides the value and acreages of each of those properties for
the previous year (2009). The local official must use those same
properties for the following two application years (2011 and 2012),
assuming that those properties retain the same assessment
classification, remain taxable, and do not undergo a change in the
original character upon which their selection was based. For each of
those following two years, the local official updates the values and
acreages of each selected residential taxable adjacent property
based on the preceding year's tax data (2010 and 2011,
respectively).
However, during that two-year period, one of the residential
taxable adjacent properties changes in character because the
residential improvement is destroyed. That change to the original
character makes the property unsuitable to include in the selected
group of residential taxable adjacent properties for the remaining
two years of the three-year period. Accordingly, the local official
substitutes a residential taxable adjacent property that is similar
to the originally selected property (i.e., an improved residential
adjacent property of similar value and size) to retain the same
number and variety of taxable adjacent properties in that expected-
use category as originally selected.
(2)(i) When selecting taxable adjacent properties for the base year
in accordance with paragraph (c)(2)(i) of this section, the local
official may include taxable adjacent properties that are recent sales
(as defined in paragraph (e)(3) of this section), among other taxable
adjacent properties, up to the following proportion:
[GRAPHIC] [TIFF OMITTED] TR20NO08.006
[[Page 70578]]
Example 4 (Proportion of Recent Sales in Assessment
Classification): Beginning with the most recent year for which data
are available (2007), the local official determines that 40 taxable
agricultural properties sold or otherwise transferred ownership in
that tax jurisdiction during the three most recent years for which
data are available (2005 through 2007) and that there were 500
taxable agricultural properties during 2007 (the most recent year
for which data are available). (If a particular property sold more
than once during the three most recent years for which data are
available, the local official counts each sale.) The local official
determines the proportion of sales for taxable agricultural property
as follows:
[GRAPHIC] [TIFF OMITTED] TR20NO08.007
(ii) The local official determines the number of recent sales
the official may include with other selected taxable adjacent
properties for that expected use category as follows:
[GRAPHIC] [TIFF OMITTED] TR20NO08.008
If the resulting number is a fraction, the local official rounds
down to the next smaller whole number to determine the maximum
number of recent sales that the official may include for that
expected use category.
Example 5 (Number of Recent Sales Local Official May Use To
Determine the Base Value for Each Expected Use Category of Eligible
Federal Property): The eligible section 8002 Federal property in the
LEA is a federally owned forest. Based on the highest and best uses
of taxable adjacent properties, three expected use categories
(assessment classifications) of properties surround that forest:
Residential, commercial, and agricultural. After identifying and
excluding a non-assessed or tax-exempt proportion for each expected
use category of the eligible Federal property, in accordance with
paragraphs (a)(3) and (c)(1) of this section, the local official
selects 10 taxable adjacent properties each for the residential and
commercial use categories, and 20 taxable adjacent properties for
the agricultural use category to determine the base value for the
taxable portion of each expected use category of the eligible
Federal property.
During the three most recent years for which data are available,
10 percent of the residential properties in the tax jurisdiction
were sold, six percent of the commercial properties were sold, and
eight percent of the agricultural properties were sold. As
illustrated in the following chart, of the 10 residential adjacent
properties selected, the local official may select only one recent
sale (10 percent (.10) x 10 residential adjacent properties = one)
to use in determining the base value for that expected use category
of the eligible Federal property.
For the commercial classification, six percent of the taxable
properties in the tax jurisdiction were recent sales. As illustrated
in the following chart, the local official may not select any recent
sales for that expected-use category because six percent (.06) of
the 10 selected commercial adjacent properties is less than one
whole number, and rounding down therefore results in 0 (six percent
(.06) x 10 commercial adjacent properties =.6 of a property).
Finally, as illustrated in the following chart, for the 20
selected agricultural adjacent properties, the local official may
use one recent sale for that expected-use category, because eight
percent (.08) of the 20 properties equals 1.6 properties (eight
percent (.08) x 20 agricultural adjacent properties = 1.6) and
rounding down to the nearest whole number results in one property.
Table 5-1--Number of Recent Sales Local Official May Use To Determine the Base Value for Each Expected Use
Category of Eligible Federal Property
----------------------------------------------------------------------------------------------------------------
Residential Commercial Agricultural
----------------------------------------------------------------------------------------------------------------
1. Percent (proportion) of recent sales for expected use 10% (.10) 6% (.06) 8% (.08)
category.......................................................
2. Total selected adjacent properties........................... 10 10 20
3. Row 1 x Row 2................................................ 1.0 .6 1.6
4. Number of ``recent sales'' local official may include among 1 0 1
other taxable adjacent properties in determining a base value
for the expected use category of the eligible Federal property.
----------------------------------------------------------------------------------------------------------------
(e) Definitions. The following terms used in this section are
defined as follows:
(1) Adjacent means next to or close to the eligible Federal
property as follows:
(i) In most cases, the term adjacent means the closest taxable
parcels within the LEA.
(ii) The term adjacent means properties farther away from the
eligible Federal property than described in paragraph (e)(1)(i) of
this section only if the Secretary determines that it is necessary
and reasonable to use those more distant properties to determine the
EAV of eligible Federal property.
(iii) The Secretary considers the term adjacent to mean
properties farther than two miles from the perimeter of the eligible
Federal property or outside the LEA only in extremely rare
circumstances determined by the Secretary.
Example 6 (Extremely Rare Circumstances): A very small LEA
consists predominantly of non-taxable and tax-exempt property
including eligible Federal property. The small taxable portion of
the LEA is topographically dissimilar from the Federal property and
classified for tax purposes differently than the eligible Federal
property most likely would be if it were on the tax rolls, in the
opinion of the local
[[Page 70579]]
official. Based on these facts, the LEA asserts that there are no
suitable adjacent taxable properties and requests permission to use
taxable properties in the adjoining LEA. After verifying the facts,
the Secretary determines that extremely rare circumstances exist
within the meaning of Sec. 222.23(e)(1)(iii) and grants the LEA's
request.
In an LEA bordering on the Pacific Ocean, the entire coastline
is taken up by the eligible Federal property. Based on the absence
of taxable oceanfront property in the LEA, the LEA seeks permission
to use taxable oceanfront property in the adjoining LEA. After
verifying the facts, the Secretary determines that extremely rare
circumstances exist within the meaning of Sec. 222.23(e)(1)(iii)
and grants the LEA's request.
(2)(i) Highest and best use of adjacent property is determined
based on a highest and best use standard in accordance with State or
local law or guidelines of general applicability, if available, that
is not used exclusively for the eligible Federal property and
includes any improvements on that property to the extent consistent
with those laws or guidelines. To the extent that State or local law
or guidelines of general applicability are not available, highest
and best use generally must be based on the current use of the
taxable adjacent property (including any improvements).
(ii) In determining the highest and best use, the local
official--
(A) Also may consider the most developed and profitable use for
which the taxable adjacent property is physically adaptable, but
only if that use is legally permissible and financially feasible,
and for which there is a need or demand in the near future;
(B) May not base the highest and best use of taxable adjacent
property on potential uses that are speculative or remote; and
(C) Must consider the extent to which the eligible Federal
property is physically adaptable for those expected uses and the
extent to which those uses would be needed if the property were not
in Federal ownership.
Example 7 (Determining the Highest and Best Use of Taxable
Adjacent Properties as the Basis for EAV): If a Federal installation
to be valued is bordered by residential and commercial/industrial
properties, the local official takes into consideration those
various highest and best uses (residential and commercial/
industrial) in determining the EAV of the eligible Federal property
as described in paragraphs (a) and (c)(2)(i) of this section.
Under that process, using acres, the local official first
determines the relative proportions of adjacent properties devoted
to each of those highest and best uses. For example, the local
official determines that the highest and best uses of the adjacent
properties are residential (60 percent) and commercial/industrial
(40 percent). However, before allocating the acres of the eligible
Federal property (1,000 acres) to those uses as described in
paragraphs (a)(2) and (b) of this section, the local official must
consider whether the Federal property is adaptable for and there is
a need for those uses, in accordance with paragraph (e)(2)(ii)(B) of
this section.
For example, if the Federal property is hilly and rocky or
contains a large area of marshland, it may not be practical for the
property to be developed primarily as residential property. Using
his or her professional judgment, the local official may decide that
it would be more appropriate to designate 50 percent of the acres as
vacant or woodland or some other taxable classification that would
indicate that improvements would likely not be located on that
property. This may also affect the proportion of the property that
would be designated as commercial/industrial because some of those
commercial/industrial uses would support the area designated for
residential use. Thus, the local official designates the remaining
50 percent of the acres as 20 percent residential and 30 percent
commercial/industrial.
After the local official determines the appropriate proportions
of expected uses, the official then multiplies those proportions by
the total number of eligible Federal acres (1,000) to determine the
number of eligible Federal acres in each expected use category,
resulting in the following: residential (20 percent or 200 acres),
vacant (50 percent or 500 acres), and commercial/industrial (30
percent or 300 acres). The local official then determines the base
value for the taxable use portion of each expected use category
under paragraph (c)(2) of this section, beginning by selecting a
sample of properties that represents the highest and best uses of
the taxable adjacent properties.
In selecting the sample, the local official must consider
whether the Federal property would support the same degree of
development as the taxable adjacent properties selected (e.g.,
density, size, and improvements) and whether there would be a need
for that type and degree of development in the near future. The
local official then makes any necessary adjustments to the sample.
(3) Recent sales or recently sold means taxable properties that
have transferred ownership within the three most recent years for
which data are available.
Example 8 (Calculation of Section 8002 EAV for Eligible Federal
Property): Two different Federal properties are located within an
LEA--a Federal forest (100 eligible acres) and a naval facility
(1,000 eligible acres). Based on the highest and best uses of
taxable adjacent properties, and as described more specifically
below, the local official establishes an EAV for the eligible
Federal property in the LEA of $92,577,000 in the base year of a
three-year cycle. That EAV is based on categorizing the Federal
forest as 100 percent (100 acres) woodland expected use and the
naval facility as 60 percent (600 acres) residential expected use
and 40 percent (400 acres) commercial/industrial expected use.
The taxing jurisdiction determines the assessed value for
taxable property by multiplying the value of the property by a
single assessment ratio applicable to the property's assessment
category. In this case, the applicable assessment ratios are:
Woodland property--30 percent of the property's value; residential
property--60 percent of the property's value; and commercial/
industrial property--75 percent of the property's value.
Federal forest (100 eligible Federal acres).
The local official first determines the type of expected-use
categories (assessment classifications) and respective proportions
to use in valuing the eligible Federal property, based on the
highest and best use of the taxable adjacent properties. In this
case, the local official categorizes 100 percent of the Federal
forest as being in the woodland use category (assessment
classification) based on the highest and best use of taxable
adjacent properties. The local official multiplies that proportion
by the total number of eligible Federal acres (100), to determine
the number of Federal acres attributable to the woodland use
category (100 acres).
The local official then determines a base value for each
category of expected use of the eligible Federal property as
described in paragraphs (a)(3), (c), and (d) of this section. The
official first determines the taxable-use portion for each expected
use category, as described in paragraph (c)(1) of this section, by
excluding the proportion of the total area of each use category of
the eligible Federal property that the official determines should be
allocated to non-assessed or tax-exempt uses.
Based on the general proportion of non-assessed or tax-exempt
uses for woodland property, the local official allocates 10 percent
of the woodland acres for non-assessed or tax-exempt purposes, and
multiplies that proportion by the total number of acres of eligible
Federal property categorized as woodland (100 acres), resulting in
10 acres attributable to a non-assessed or tax-exempt proportion of
woodland. The local official then subtracts that non-assessed or
tax-exempt portion (10 acres) from the total acres of eligible
Federal property in that expected-use category (100 acres),
resulting in 90 acres attributable to the taxable portion of the
woodland expected-use category.
The local official then selects a sample of taxable adjacent
properties from the expected use category (woodland), as described
in paragraphs (c)(2) and (d) of this section, and uses that sample
to establish a base value for that category. The sample includes the
minimum required number of taxable adjacent properties (generally at
least 10) from the woodland category. In addition, in selecting that
sample of properties, the local official uses only the allowable
proportion of recent sales, calculated as described in paragraph
(d)(2) of this section. In selecting the specific taxable adjacent
properties that make up that sample and that reflect the highest and
best uses of the adjacent taxable properties in accordance with
paragraph (c)(2)(i) of this section, the local official also
considers whether the Federal property is adaptable for and whether
there would be a need for those specific types of properties, such
as in size and improvements, in accordance with paragraph
(e)(2)(ii)(B) of this section.
The local official calculates the average value per acre
($1,000) of the selected sample of taxable adjacent woodland
properties. The local official then multiplies the number of acres
attributable to the taxable portion of the
[[Page 70580]]
woodland expected use category (90 acres) by the average value per
acre ($1,000) of the selected taxable woodland adjacent properties,
resulting in a base value for the woodland use category of the
Federal forest of $90,000.
The local official then determines the section 8002 EAV for the
Federal forest as described in paragraph (a)(4) of this section by
multiplying the base value established for the woodland portion of
the property ($90,000) by 30 percent (the assessment ratio for
woodland property), resulting in a section 8002 EAV of $27,000 for
the Federal forest.
Naval facility (1,000 total eligible Federal acres).
The local official first determines the type of expected-use
categories (assessment classifications) and respective proportions
to use in valuing the eligible Federal property. For the naval
facility, the local official determines that the relative mix of
taxable adjacent properties, based on their highest and best uses,
is 60 percent residential and 40 percent commercial/industrial. The
local official multiplies those proportions by the total eligible
Federal acres in the naval facility (1,000), resulting in 600 acres
(60 percent x 1,000 acres = 600 acres) to be valued as residential
expected use and 400 acres (40 percent x 1,000 acres = 400 acres) to
be valued as commercial/industrial expected use.
The local official then determines a base value for each of
those expected use categories of the eligible Federal property. For
the residential expected-use category, the local official allocates
20 percent for non-assessed or tax-exempt uses, and multiplies that
proportion by the number of eligible Federal acres allocated to that
expected-use category (600 acres), resulting in 120 acres allocated
to non-assessed or tax-exempt uses. The local official excludes
those 120 acres by subtracting them from the total number of
residential acres (600 acres), resulting in 480 acres allocated to
taxable residential uses for the residential portion of the eligible
Federal property in the naval facility.
For the commercial/industrial expected-use category, the local
official allocates 15 percent for non-assessed or tax-exempt uses,
and multiplies that proportion by the number of eligible Federal
acres allocated to that expected-use category (400 acres), resulting
in 60 acres allocated to non-assessed or tax-exempt uses. The local
official excludes those 60 acres by subtracting them from the total
number of commercial/industrial acres (400 acres), resulting in 340
acres allocated to taxable commercial/industrial uses for the
commercial/industrial portion of the eligible Federal property in
the naval facility.
The local official then selects a sample of taxable adjacent
properties from each identified use category, as described in
paragraphs (c)(2) and (d) of this section, which the official uses
to establish a base value for each of those expected-use categories.
That sample includes the minimum required number of taxable adjacent
properties (generally at least 10) for each expected use category.
In addition, in selecting the sample of properties, the official
uses only the allowable proportion of recent sales, calculated as
described in paragraph (d)(2) of this section.
In considering whether the specific group of taxable adjacent
properties selected reflects the highest and best uses of the
adjacent taxable properties in accordance with paragraph (c)(2)(i)
of this section, the local official also considers whether the
Federal property is adaptable for and whether there would be a need
for those specific types of properties, in accordance with paragraph
(e)(2)(ii)(B) of this section.
For example, if the official selects 10 residential parcels that
are all small, such as one quarter (.25) of an acre or less, and
uses those parcels to determine an EAV for a large area of Federal
property, the result may exaggerate what would likely happen to that
property if it were available for development. If the official uses
only these small parcels (e.g., .25 acres each) for the 480 acres
allocated to taxable residential uses for the residential portion of
the eligible Federal property, the official would be projecting that
approximately 1,920 small residential lots would be developed on
that Federal property (.25 x 480 = 1,920) if the property were no
longer in Federal ownership. The Department believes that it would
be extremely unlikely that 480 acres of the property would develop
into this number of residential properties. This outcome would not
reflect the local official's best judgment of the reasonable
development of the property. To avoid this inappropriate result, the
official would identify other taxable adjacent parcels of varying
sizes to provide a more accurate picture of how the Federal property
would be developed if it were on the tax rolls.
Similarly, with respect to improvements, if the local official
selected taxable adjacent properties that all were improved parcels,
the official would be projecting that all of the 480 acres allocated
to taxable residential uses for the residential portion of the
eligible Federal property would be improved. If the residential
taxable adjacent parcels are a mixture of improved and unimproved
properties, that projection also may be speculative based on the
number of improvements that reasonably would be needed for the
current and any expected new population. If the assumption is not
reasonable that the entire 480 acres would be improved, then the
local official would make adjustments accordingly in the sample of
taxable adjacent properties by adding some unimproved residential
parcels to the sample.
For the portion of the naval facility allocated to taxable
residential use, the local official calculates the average per-acre
value ($100,000) of the selected sample of residential adjacent
properties as described in paragraph (c)(2)(ii) of this section. The
local official then multiplies the number of acres allocated to the
taxable residential portion (480 acres) by the average value per
acre ($100,000) of the sample of residential adjacent properties to
determine the base value ($48,000,000) for that portion of the
eligible Federal property, as described in paragraph (c)(2)(iii) of
this section. The local official determines a section 8002 EAV for
that residential portion by multiplying the $48 million by 60
percent (assessment ratio for residential property), resulting in
$28,800,000 as described in paragraph (a)(4) of this section.
Similarly, for the portion of the naval facility allocated to
taxable commercial/industrial use, the local official calculates an
aggregate per acre value ($250,000) of the selected sample of
commercial/industrial taxable adjacent properties as described in
paragraph (c)(2)(ii) of this section. The local official then
multiplies the number of eligible Federal property acres allocated
to the taxable commercial/industrial portion (340 acres) by the
average value per acre of the selected commercial/industrial
adjacent properties ($250,000) to determine the base value for that
portion of the eligible Federal property ($85,000,000), as described
in paragraph (c)(2)(iii) of this section. The local official
determines a section 8002 EAV for that commercial/industrial portion
by multiplying the $85,000,000 by 75 percent (the assessment ratio
for commercial/industrial property), resulting in $63,750,000 as
described in paragraph (a)(4) of this section.
The local official then calculates the total section 8002 EAV
for the entire naval facility as described in paragraph (a)(5) of
this section by adding the figures for the residential portion
($28,800,000) and the commercial/ industrial portion ($63,750,000),
resulting in a total section 8002 EAV for the entire naval facility
of $92,550,000.
Total section 8002 property in the LEA. Finally, the local
official determines the aggregate section 8002 assessed value for
the LEA as described in paragraph (a)(6) of this section by adding
the section 8002 EAV for the Federal forest ($27,000), and the total
section 8002 EAV for the naval facility ($92,550,000), resulting in
an aggregate assessed value of $92,577,000.
This entire process is illustrated in Tables 8-1 and 8-2 below:
[[Page 70581]]
Table 8-1--Allocation of Section 8002 Eligible Federal Property to Non-Taxable and Taxable Uses for Determining
Base Values
----------------------------------------------------------------------------------------------------------------
Proportion of
eligible Total acres Proportion Acres Acres
Federal allocated to allocated to allocated to allocated to
Tax classifications of adjacent property property use non-assessed non-assessed taxable uses
properties based on highest and allocated to categories or tax-exempt or tax-exempt and used to
best use property use (Col. 2 x uses uses (Col. 4 x determine base
categories eligible (percent) Col. 3) values (Col. 3
(percent) acres) - Col. 5)
(1) (2) (3) (4) (5) (6)
----------------------------------------------------------------------------------------------------------------
Federal Forest (100 eligible acres)
----------------------------------------------------------------------------------------------------------------
Woodland........................ 100 100 10 10 90
-------------------------------------------------------------------------------
Subtotal.................... .............. 100 .............. 10 90
----------------------------------------------------------------------------------------------------------------
Naval Facility (1,000 eligible acres)
----------------------------------------------------------------------------------------------------------------
Residential..................... 60 600 20 120 480
Commercial/industrial........... 40 400 15 60 340
-------------------------------------------------------------------------------
Subtotal.................... 100 1,000 .............. 180 820
-------------------------------------------------------------------------------
Total................... .............. 1,100 .............. 190 910
----------------------------------------------------------------------------------------------------------------
Table 8-2--Calculation of Section 8002 Base Values, Section 8002 Estimated Assessed Values (EAVs), and Aggregate
Assessed Value
----------------------------------------------------------------------------------------------------------------
Federal acres Average value/ Base value of
allocated for acre of eligible Assessment Section 8002
Classification of adjacent taxable use taxable Federal ratio EAVs and
parcels (Table 7-1, adjacent property (Col. (percent) aggregate
Col. 6) parcels 3 x Col. 4) assessed value
(1) (2) (3) (4) (5) (6)
----------------------------------------------------------------------------------------------------------------
Federal Forest (90 eligible acres allocated for taxable use (see Table 7-1, column 6))
----------------------------------------------------------------------------------------------------------------
Woodland........................ 90 $1,000 $90,000 30 $27,000
-------------------------------------------------------------------------------
Subtotal.................... 90 .............. 90,000 .............. 27,000
----------------------------------------------------------------------------------------------------------------
Naval Facility (820 eligible Federal acres allocated for taxable use (see Table 6-1, column 6))
----------------------------------------------------------------------------------------------------------------
Residential..................... 480 100,000 48,000,000 60 28,800,000
Commercial/Industrial........... 340 250,000 85,000,000 75 63,750,000
-------------------------------------------------------------------------------
Subtotal.................... 820 .............. 133,000,000 .............. 92,550,000
-------------------------------------------------------------------------------
Total (Aggregate .............. .............. 133,090,000 .............. 92,577,000
Assessed Value)........
----------------------------------------------------------------------------------------------------------------
(Authority: 20 U.S.C. 7702)
[FR Doc. E8-27462 Filed 11-19-08; 8:45 am]
BILLING CODE 4000-01-P
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