FR Doc E8-12233[Federal Register: June 2, 2008 (Volume 73, Number 106)]
[Proposed Rules]
[Page 31591-31604]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jn08-23]
Download: 
-----------------------------------------------------------------------
[[Page 31591]]
-----------------------------------------------------------------------
Part III
Department of Education
-----------------------------------------------------------------------
34 CFR Part 222
Impact Aid Programs; Proposed Rule
[[Page 31592]]
-----------------------------------------------------------------------
DEPARTMENT OF EDUCATION
34 CFR Part 222
[DOCKET ID ED-2008-OESE-0008]
RIN 1810-AB00
Impact Aid Programs
AGENCY: Office of Elementary and Secondary Education, Department of
Education.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Secretary proposes to amend 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 proposed 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: We must receive your comments on or before July 2, 2008.
ADDRESSES: Submit your comments through the Federal eRulemaking Portal
or via postal mail, commercial delivery, or hand delivery. We will not
accept comments by fax or by e-mail. Please submit your comments only
one time, in order to ensure that we do not receive duplicate copies.
In addition, please include the Docket ID at the top of your comments.
Federal eRulemaking Portal: Go to http://www.regulations.gov to
submit your comments electronically. Information
on using Regulations.gov, including instructions for accessing agency
documents, submitting comments, and viewing the docket, is available
on the site under ``How To Use This Site.''
Postal Mail, Commercial Delivery, or Hand Delivery. If you
mail or deliver your comments about these proposed regulations, address
them to Catherine Schagh, Director, Impact Aid Program, U.S. Department
of Education, 400 Maryland Avenue, SW., Washington, DC 20202-6244.
Privacy Note: The Department's policy for comments received from
members of the public (including those comments submitted by mail,
commercial delivery, or hand delivery) is to make these submissions
available for public viewing in their entirety on the Federal
eRulemaking Portal at http://www.regulations.gov. Therefore,
commenters should be careful to include in their comments only
information that they wish to make publicly available on the
Internet.
FOR FURTHER INFORMATION CONTACT: Catherine Schagh, Director, Impact Aid
Program, U.S. Department of Education, 400 Maryland Avenue, SW.,
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 under FOR FURTHER
INFORMATION CONTACT.
SUPPLEMENTARY INFORMATION:
Invitation To Comment
We invite you to submit comments about these proposed regulations.
The Secretary is particularly interested in comments on proposed Sec.
222.23, in the following areas:
Sec. 222.23(a)(3) and (c)(1) (Excluding from the base
value of the expected use categories of the eligible Federal property a
portion allocated to accommodate anticipated non-assessed or tax-exempt
uses):
(1) Based on the highest and best use of taxable adjacent
properties, can local officials determine the proportion of the
eligible Federal property in each use category that likely would be
exempt from local real property taxes (e.g., roads, parks, and other
municipal uses) if the Federal property were privatized?
(2) Would it be appropriate to establish a standard proportion for
each use category of eligible Federal property that would be allocated
to anticipated non-assessed or tax-exempt uses? If so, what would be
reasonable figures to use for this purpose?
Sec. 222.23(c)(2)(i) (Minimum number of adjacent
properties):
(1) Could local officials readily find a minimum number of adjacent
properties for each identified use category (assessment classification)
for determining the base values of those categories and the estimated
assessed value (EAV) of the eligible Federal property?
(2) If so, is 10 a reasonable minimum number of adjacent properties
for each identified use category of adjacent property?
(3) If 10 is not a reasonable minimum number, what other minimum
number would be reasonable?
(4) Should different minimum numbers of taxable adjacent properties
be applied to different LEAs (e.g., LEAs that contain taxable property
of less than $100 million in total assessed value might be required to
use at least 10 properties, and LEAs that contain taxable property
equal to $100 million or more in total assessed value might be required
to use at least 30 properties)?
Sec. 222.23(d)(2) (Using recent sales):
Is it possible for a local official to identify readily the data
needed to determine the proportion of sales that are ``recent sales''
as defined in proposed Sec. 222.23(e)(3) (that is, the number of
taxable properties in an assessment classification that have
transferred ownership within the three most recent years for which data
are available) for each type of taxable adjacent property and the total
number of properties in that assessment classification?
Sec. 222.23(e)(1) (Definition of ``adjacent''):
(1) Could local officials implement a definition of adjacent
property that generally means the closest taxable parcels, and includes
parcels further than one mile from the perimeter of the Federal
property only in extremely rare circumstances?
(2) Would the proposed definition allow the local official
generally to select at least 10 taxable properties in each expected use
category (assessment classification) to determine a base value for that
category?
(3) If not, what maximum distance from the perimeter of the
eligible Federal property would be reasonable for adjacent properties?
Affected LEAs will have ample opportunity to comment on the
specific provisions of the proposed regulations and to share the
document with their local assessment officials. We expect that the
final regulations will be effective for fiscal year (FY) 2010
applications, which we anticipate will be due February 2, 2009. In
addition, the proposed changes generally would affect only the last
step of the payment formula and, thus, would have a limited impact on
overall applicant revenues.
To ensure that your comments have maximum effect in developing the
final regulations, we urge you to identify clearly the specific section
or sections of the proposed regulations that each of your comments
addresses and to arrange your comments in the same order as the
proposed regulations.
We invite you to assist us in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any further opportunities we should
take to reduce potential costs or increase potential benefits while
[[Page 31593]]
preserving the effective and efficient administration of the program.
During and after the comment period, you may inspect all public
comments about these proposed regulations by accessing Regulations.gov.
You may also inspect the comments, in person, in room 3E107, 400
Maryland Avenue, SW., Washington, DC, between the hours of 8:30 a.m.
and 4 p.m., Eastern time, Monday through Friday of each week except
Federal holidays.
Assistance to Individuals With Disabilities in Reviewing the Rulemaking
Record
On request, we will supply an appropriate aid, such as a reader or
print magnifier, to an individual with a disability who needs
assistance to review the comments or other documents in the public
rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of aid, please contact the person
listed under FOR FURTHER INFORMATION CONTACT.
Background
These proposed regulations would amend regulations implementing the
Payments for Federal Property portion of the Impact Aid program,
authorized under section 8002 of the Act. Current regulations
implementing the section 8002 program are found in 34 CFR 222.20
through 222.23.
As described more fully in this notice under Summary of Proposed
Regulations, the Secretary proposes revisions to Sec. 222.21,
concerning how an LEA establishes eligibility for section 8002
payments, and 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. In accordance with
the Department's Principles for Regulating, these proposed regulations
are essential to promoting quality and equality of opportunity in
education.
The amendments to Sec. 222.21 would provide greater flexibility to
applicants in documenting their eligibility for assistance under
section 8002 of the Act, thereby providing more equitable treatment for
applicants that are affected by specific record retention policies. The
amendments to Sec. 222.23 would provide more specificity for local tax
officials who establish the EAV of Federal property, and would result
in greater uniformity in the methods used to establish those values,
eliminate inequities in current practices, and make the determinations
of EAVs more consistent and reliable.
Summary of Proposed Regulations
Following is a summary of the proposed regulatory provisions. We
discuss substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
proposed regulatory provisions that are technical or otherwise minor in
effect.
Section 222.21 What requirements must a local educational agency meet
concerning Federal acquisition of real property within the local
educational agency?
Statute: Section 8002(a)(1) of the Act provides that LEAs are
eligible for assistance if, among other things, the United States owns
property in that LEA that has been acquired since 1938 and that had an
assessed value (determined as of the time or times of acquisition)
aggregating 10 percent or more of the assessed value of all real
property in the LEA (at the time or times of acquisition or, in certain
specified cases, in the first year preceding or succeeding
acquisition).
Current Regulations: Section 222.21(d) lists the documents that an
applicant must submit to demonstrate that the 10 percent threshold
described in the Act has been satisfied. Section 222.21(d)(1) provides
that new applicants may use only original records prepared by legally
authorized officials at the time of Federal acquisition, or facsimiles
such as microfilms of those records. Redeterminations of eligibility
may be based only on records of the type described in Sec.
222.21(d)(1) or Departmental records. Section 222.21(e) provides that
the Secretary does not base determinations or redeterminations of
eligibility on secondary documentation such as estimates,
certifications, or appraisals.
Proposed Regulations: We propose to amend Sec. 222.21(d)(1) to
expand the scope of records upon which the Secretary determines or
redetermines eligibility under section 8002(a)(1) of the Act. Under the
proposed regulations, if the forms of records currently specified in
the regulations are unavailable, the Secretary would have the
discretion to base the determinations on other records the Secretary
deems 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. In addition, we propose to amend Sec. 222.21(e) to
provide that the Secretary does not base a determination or
redetermination of eligibility on secondary documentation if that
documentation is in the nature of an opinion, such as estimates,
certifications, or appraisals.
Reasons: The Secretary is proposing these regulations to provide
greater flexibility to applicants in documenting their eligibility for
assistance under section 8002 of the Act, thereby promoting quality and
equality in education. These changes would allow eligibility to be
based on alternative records to the original tax records if such other
reliable alternative records exist. In some jurisdictions, record
retention standards are resulting in the planned destruction of tax
records, which under the current regulations makes it difficult and
sometimes impossible for new applicants to establish eligibility for
section 8002 payments. This increased flexibility would allow those
applicants to establish eligibility if they can locate alternative
reliable records.
However, under proposed Sec. 222.21(e), secondary documentation
that is in the nature of an opinion, such as estimates, certifications,
or appraisals, could not be used as the basis for establishing section
8002 eligibility. Such records are not reliable evidence of a
property's actual assessed value for taxation purposes, upon which an
LEA's eligibility for assistance under section 8002 is based.
Section 222.23 How does a local educational agency determine the
aggregate assessed value of its eligible Federal property for its
section 8002 payment?
Statute: The amount of an LEA's section 8002 assistance is based,
in part, on a determination of the aggregate assessed value of the
eligible Federal property in the LEA. Section 8002(b)(3) of the Act
provides that the local official responsible for assessing the value of
real property for the purpose of levying property taxes shall determine
that aggregate assessed value of the eligible Federal property on the
basis of the highest and best use of property adjacent to the eligible
Federal property as of the time that the value is determined.
Current Regulations: Section 222.23 describes how the local
official determines the aggregate assessed value of eligible Federal
property. In brief, the regulations provide that the local official
first determines (estimates) a fair market value (FMV) of the eligible
Federal property based on the highest and best use of taxable
properties adjacent to the eligible Federal property (Sec.
222.23(a)(1)). The local official then determines a section 8002
assessed value for each eligible Federal property by adjusting the FMV
by any
[[Page 31594]]
percentage, ratio, index, or other factor that is used for taxable
property. The regulations provide that, in making this adjustment, the
official may assume that there was a transfer of ownership of the
eligible Federal property for the year in which the section 8002
assessed value is being determined (Sec. 222.23(a)(2)). The official
then calculates a section 8002 aggregate assessed value for all
eligible Federal property in the LEA by totaling the section 8002
assessed values for all eligible Federal property in the LEA (Sec.
222.23(a)(3)). The regulations also provide definitions of the terms
adjacent and highest and best use (Sec. 222.23(b)(1) and (2),
respectively) and examples to further explain the regulatory
requirements and definitions.
Proposed Regulations and Rationale: We propose a number of changes
to Sec. 222.23. First, we propose in new paragraphs (a)(1) through
(a)(6) to outline the process local officials must use in determining
the aggregate assessed value of Federal property and to clarify that
the aggregate assessed value of the Federal property that the local
officials determine is an estimate (estimated assessed value or EAV).
The EAV established for section 8002 payment purposes is different than
a tax-exempt value that a jurisdiction may be required by State law to
establish for the Federal property and carry on its tax-exempt property
rolls. Next we propose to redesignate current paragraph (b)
(Definitions) as paragraph (e), and to add new paragraphs (b), (c), and
(d) that describe in detail the specific steps in the overall process
outlined in new paragraph (a).
We are proposing these amendments to provide more specificity for
local tax officials who establish the EAV of Federal property and
greater uniformity in the establishment of those values, eliminate
inequitable inflation in the value of the eligible Federal property,
and provide more reliability in the determination of EAVs. These
improvements in determining EAVs will promote quality and equality in
education. Our rationale for specific provisions is described in the
following discussion.
General (Sec. 222.23(a))
Proposed paragraphs (a)(1) through (a)(6) would describe the
overall process local officials would use to determine the aggregate
EAV of eligible Federal property. Proposed paragraph (a)(1) would
provide, as required by section 8002(b)(3) of the Act, that a local
official who is responsible for assessing the value of real property
located in the jurisdiction of the LEA for levying a property tax makes
the determination of the section 8002 aggregate EAV.
Proposed paragraph (a)(2) would specify that the local official
first would categorize proportionately the types of expected uses of
the eligible Federal property in each Federal installation or area in
the LEA, based on the highest and best uses of taxable properties
adjacent to the eligible Federal property, and then allocate the
eligible Federal property acres accordingly to each of those expected
uses. The specific process for categorizing the expected uses and
allocating the Federal acres to those proportions would be described in
proposed paragraph (b).
Under proposed paragraph (a)(3), the local official would determine
a base value for each category of expected use of the eligible Federal
property in each Federal installation or area. The specific process for
establishing the base values of the expected use categories would be
described in proposed paragraphs (c) and (d). As explained in more
detail later in this section, this process would exclude a proportion
for non-assessed and tax-exempt uses and specify a minimum sample size,
a three-year cycle, and an allowable number of recent sales.
Proposed paragraph (a)(4) would describe how the local official
determines a section 8002 EAV for each category of expected use of the
eligible Federal property in each Federal installation or area. Under
this provision, the local official would determine the EAV by adjusting
the base value for that category, which is established as described in
paragraph (a)(3), by any percentage, ratio, index, or other factor that
the official would use to determine the assessed value if the eligible
Federal property were taxable.
Under proposed paragraph (a)(5), the local official determines a
total section 8002 EAV for each Federal installation or area by adding
the assessed values determined for each category of eligible Federal
property in that Federal installation or area. Finally, proposed
paragraph (a)(6) describes how the local official determines the
section 8002 aggregate EAV for all Federal property in the LEA.
Categorizing Expected Uses (Sec. 222.23(b))
Proposed paragraph (b) would detail how local officials would
categorize proportionately the types of expected uses of eligible
Federal property based on the highest and best uses of taxable adjacent
properties. Once this step is complete, the local official would
multiply each proportion of the taxable adjacent properties by the
total acres of the eligible Federal property to derive the number of
acres in each category for the eligible Federal property.
Determining the Base Value for Expected Use Categories (Sec.
222.23(c))
Proposed paragraph (c) details how the local official would
establish a base value for each category of expected use of the
eligible Federal property. First, as explained in proposed paragraph
(c)(1), the local official would identify the taxable use portions of
the eligible Federal property by allocating a proportion of the
eligible Federal property acres identified for each use category to
expected non-assessed or tax-exempt uses, such as schools, parks,
churches, and roads. The local official would base these proportions on
the amount of area the official believes normally would comprise the
non-assessed or tax-exempt uses in that assessment category. (The non-
assessed or tax-exempt proportions would likely vary for different
categories of taxable property.) The local official then would multiply
the non-assessed or tax-exempt proportion(s) by the number of acres in
each expected use category of the eligible Federal property to
determine the number of acres attributable to non-assessed or tax-
exempt uses. Next, the local official would subtract the number of
acres attributable to non-assessed or tax-exempt uses from the number
of acres of eligible Federal property in each expected use category to
determine the taxable use portion of that category.
Under proposed paragraph (c)(2), for the portions of the eligible
Federal property allocated for taxable uses, the local official would
calculate a base value for each expected use category from a selected
sample of taxable adjacent properties representing the highest and best
uses of the taxable adjacent properties for each category.
Minimum number of taxable adjacent properties. Currently, as a
matter of policy, we encourage local officials to select at least three
taxable adjacent parcels to determine the base value for each expected
use category (assessment classification) for the eligible Federal
property. Some local officials use significantly more than three
parcels. We believe that a sample size of more than three would lead to
greater reliability in the resulting base value figure and in the
overall EAV of the eligible Federal property. The purpose of the
proposed changes is to standardize, at a reasonable number of 10, the
minimum number of taxable adjacent properties that all section 8002
applicants must use to establish those base value figures.
Accordingly, under proposed paragraph (c)(2)(i), we would require
all
[[Page 31595]]
local officials to use at least 10 taxable adjacent properties to
determine the base value of each expected use category (assessment
classification). As described elsewhere in the preamble under
Invitation to Comment, we specifically request comments on this
proposed minimum number.
Under the proposed regulations in paragraph (c)(2)(i), if at least
three but fewer than 10 taxable adjacent properties are available for
an expected use category, the local official would identify the taxable
adjacent property with the lowest value per acre and replicate that
property as many times as necessary to reach a total of 10 properties
in combination with the available taxable adjacent parcels.
If fewer than three taxable adjacent properties exist in a
particular expected use category, generally the local official would
not use that category in determining the assessed value of the eligible
Federal property. However, the proposed regulations provide that, in
extremely rare circumstances, the local official could use fewer than
three parcels for a particular use category if the Secretary determines
it to be necessary and reasonable.
For example, if one taxable property adjacent to the eligible
Federal property is a golf course, which is a separate assessment
classification in that jurisdiction, the Secretary could determine that
it was necessary and reasonable to allow the local official to use only
that one golf course for that applicable use category rather than
disallowing the category for lack of a sufficient number of taxable
adjacent properties. (Under the proposed changes to the definition of
highest and best use in paragraph (e)(2)(iii), the local official would
also have to have determined that the Federal property is physically
adaptable for use as a golf course and that there would be a need or
demand for a golf course if the property were not federally owned.)
After selecting the adjacent properties for each expected use
category to serve as the basis for valuing the eligible Federal
property, the local official would calculate an average per acre value
for the taxable portion of each expected use category in accordance
with proposed paragraph (c)(2)(ii). The local official then would
determine the base value for each expected use category by multiplying
the average per acre value by the number of acres of eligible Federal
property in that expected use category, as described in proposed
paragraph (c)(2)(iii).
Additional Procedures for Determining Base Values (Sec. 222.23(d))
Proposed paragraph (d) would detail the following additional
procedures that the local official would be required to apply in
establishing a base value for each category of expected use of the
eligible Federal property.
Three-year cycle. Under proposed paragraph (d)(1), the local
official would allocate expected uses for the eligible Federal property
and select taxable adjacent properties only once every three years. The
year for which that determination occurs would be referred to as the
base year. In the following two years, the local official would
determine the section 8002 EAV of eligible Federal property under
section 8002(b)(3) of the Act by using the same allocation of expected
uses and the same adjacent properties selected for the base year, but
updating the values and acreage of the selected taxable adjacent
properties.
Under this proposal, in non-base years (that is, the two program
application years following the base year), the local official could
remove a taxable adjacent property selected for the base year only if
that adjacent property became unsuitable for determining the base value
for the expected use category of the eligible Federal property. A
taxable adjacent property would be considered unsuitable only under the
following circumstances:
(1) a changed assessment classification (for example, an originally
selected agricultural parcel was subdivided into residential parcels);
(2) a change to tax-exempt status; or
(3) a change in the original character upon which its selection was
based (for example, the improvement on an originally selected improved
parcel is destroyed, or an improvement is built on an originally
selected unimproved parcel).
If a previously selected adjacent property became unsuitable during
the three-year cycle, the local official would be required to
substitute a suitable taxable adjacent parcel of the same assessment
classification as the original adjacent property. In the absence of any
suitable parcel for substitution, the requirements for using a minimum
number of taxable adjacent properties (minimum sample size) in proposed
paragraph (c)(2)(i) would still apply.
Limiting transfer-of-ownership assumption (recent sales). Second,
under proposed paragraph (d)(2), local officials would no longer be
permitted to assume a total transfer in ownership of the eligible
Federal property. Currently, Sec. 222.23(a)(2) allows tax officials to
assume a transfer of ownership of the eligible Federal property for the
year in which the section 8002 EAV is being determined, by using
taxable adjacent properties that all have recently sold. This option
originally was included in the regulations to provide flexibility to
localities in determining the valuation of the eligible Federal
property, including those jurisdictions that re-assess real property
primarily upon resale.
Under this assumption, some LEAs have selected all new adjacent
parcels each year that are only recent sales. This practice has
resulted in disparities among LEAs in the relative rate of increase of
maximum section 8002 payments. We do not believe that it is reasonable
to assume that the eligible Federal property, if privatized, would
change ownership in its entirety every year.
Therefore, we propose to replace current Sec. 222.23(a)(2) with
paragraph (d)(2)(i), to allow local officials to use a maximum number
of recent sales to determine the base value for each identified
expected use category. That number is based on the proportion that
results when the number of taxable properties in each expected use
category that has transferred ownership (i.e., sold) over a three year-
period is divided by the total number of taxable properties in the
specific expected use category for the most recent year for which data
are available. The three-year period would be established by an
accompanying new definition of recent sales in proposed paragraph
(e)(3), which would define recent sales or recently sold as meaning
taxable properties that have transferred ownership within the three
most recent years for which data are available. Under proposed
paragraph (d)(2)(ii), the local official then would multiply the total
number of taxable adjacent properties selected by that proportion to
determine how many recently sold taxable adjacent properties the
official could include among the taxable adjacent properties used to
establish the base value for that expected use category.
As required by section 8002(b)(3) of the Act, this proposed
approach still results in the EAV of the eligible Federal property
being based on the highest and best use of adjacent properties. Under
the proposed approach, the local official would take those highest and
best uses of adjacent properties into consideration by using them as
the basis for categorizing and allocating the expected uses of the
eligible Federal property, and then by establishing base values for
those expected use categories with a
[[Page 31596]]
selected sample of those adjacent properties.
If applying the recent sales proportion to the total number of
selected adjacent properties results in a fraction, proposed paragraph
(d)(2)(ii) would require the local official to round the fraction down
to the nearest whole number. For example, if the proportion of recent
sales over a three-year period in an expected use category is six
percent and the local official selects 10 adjacent properties, only .6
of those adjacent properties, or zero adjacent properties (by operation
of rounding down) could be recent sales.
In some cases, an LEA may be located in and have eligible Federal
property in more than one taxing jurisdiction. In those cases, by
operation of State law, more than one local official is responsible for
establishing the EAV for eligible Federal property in that LEA and,
therefore, would establish separate EAVs for the eligible section 8002
Federal property in each respective taxing jurisdiction.
Definitions (Sec. 222.23(e))
We propose the following changes to redesignated paragraph (e):
Adjacent (redesignated paragraph (e)(1)). The definition
of adjacent would be amended to provide that, in most cases, adjacent
means the taxable parcels within the LEA that are closest to the
eligible Federal property. The proposed definition would specify that
adjacent properties means properties further away from the eligible
Federal property only if the Secretary determines that it is reasonable
and necessary to use those properties for determining the EAV of
eligible Federal property. Under the proposed definition, the term
adjacent would mean further away than one mile from the perimeter of
the eligible Federal property, or outside the LEA, only in extremely
rare circumstances determined by the Secretary. This provision would
help ensure that the adjacent property upon which the valuation of the
eligible Federal property is based is close to the eligible Federal
property and will more truly reflect what the Federal property could
become if privatized.
Highest and best use (redesignated paragraph (e)(2)). We
propose to amend the definition of highest and best use. The current
definition of this term in Sec. 222.23(b)(2)(i) provides that the
highest and best use of an adjacent parcel of taxable land means the
fair market value based upon a ``highest and best use'' standard in
accordance with State or local law and guidelines, if available, or
otherwise generally a reasonable fair market value based upon the
current use of the property.
Although the current definition is a reasonable interpretation of
section 8002(b)(3) of the Act that requires the EAV of Federal property
to be determined ``on the basis of'' the highest and best use of
adjacent taxable property, LEAs have interpreted the provision to mean
that each year they may base the EAV of Federal property exclusively on
the assessed value of adjacent taxable properties that have recently
transferred ownership. In some cases, this has led to unreasonably
inflated EAVs of eligible property. We view this approach to be
unreasonable as it is effectively based on the implausible assumption
that an entire Federal property, which is often a quite extensive tract
of land, changes hands in its entirety every year.
Accordingly, the Secretary is proposing to amend the definition of
highest and best use in redesignated paragraph (e)(2)(i) by eliminating
the references to ``fair market value.'' Local officials still would be
required to use the highest and best use of taxable adjacent properties
to categorize the expected uses of the eligible Federal property under
proposed paragraphs (a)(2) and (b), and to establish the base values of
the expected use categories of that eligible Federal property under
proposed paragraphs (a)(3), (c), and (d). This approach would be
consistent with the Act and permit a reasonable limitation on the use
of recently sold adjacent properties in establishing the EAV of
eligible property.
As noted, current Sec. 222.23(b)(2)(i) provides that highest and
best use is established in accordance with available State or local
laws or guidelines, and includes any improvements consistent with those
laws or guidelines. An additional proposed amendment to this paragraph
would clarify that State or local laws or guidelines must be of general
applicability and not used exclusively to value eligible Federal
property. We are proposing this change to ensure consistency between
the methods States and local jurisdictions use to establish highest and
best use values for the eligible Federal property and the methods that
they ordinarily use to value non-Federal property in the jurisdiction.
In addition, we propose to amend this definition to clarify that,
to the extent State or local law or guidelines of general applicability
are not available, the determination of the highest and best use would
be based on the current use of the adjacent parcels, including any
improvements. This clarification is consistent with current practice.
We also propose to amend the definition of highest and best use (in
redesignated paragraph (e)(2)(i) and (iii)) to clarify that the local
official may consider the most developed and profitable use for which
the taxable adjacent property is physically adaptable only if that use
is legally permissible and financially feasible, and for which there is
a need or demand in the near future. The local official also takes into
consideration the same factors with respect to the eligible Federal
property. As with the adjacent properties, the proposed regulations
would require that the Federal property be physically adaptable for the
various uses upon which its EAV is being based and that there be a need
or demand in the near future for those uses if the property was not in
Federal ownership. We believe that these additional requirements are
necessary to reflect realistic highest and best use values of the
adjacent properties, and to apply those values realistically to the
eligible Federal property. The proposed regulations would prohibit a
local official from basing the highest and best use on potential uses
that are speculative or remote.
Recent sales or recently sold (new paragraph (e)(3)).
Finally, as noted previously, proposed paragraph (e)(3) would define
recent sales or recently sold to mean taxable properties that have
transferred ownership within the most recent three years for which data
are available. This timeframe for recent sales should benefit small
LEAs that have fewer taxable properties and fewer annual sales than
larger, more developed LEAs tend to have.
We also have added more examples throughout the proposed
regulations, and a number of illustrative tables, to assist LEAs and
local tax officials in understanding these proposed changes.
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
[[Page 31597]]
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.
1. Potential Costs and Benefits
Under Executive Order 12866, we have assessed the potential costs
and benefits of this regulatory action.
The potential costs associated with the proposed regulations are
those resulting from statutory requirements and those we have
determined to be necessary for administering this program effectively,
fairly, and efficiently.
In general, the proposed regulations would 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 would 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 would be offset by
the accompanying regulatory change to reduce the selection cycle from
every year to once every three years.
These proposed 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. In assessing the potential costs and
benefits, both quantitative and qualitative, of this regulatory action,
we have determined that the benefits would 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.
2. Clarity of the Regulations
Executive Order 12866 and the Presidential memorandum on ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following:
Are the requirements in the proposed regulations clearly
stated?
Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 222.21 What requirements must a local educational agency meet
concerning Federal acquisition of real property within the local
educational agency?)
Could the description of the proposed regulations in the
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in
making the proposed regulations easier to understand? If so, how?
What else could we do to make the proposed regulations
easier to understand?
Send any comments that concern how the Department could make these
proposed regulations easier to understand to the person listed in the
ADDRESSES section of the preamble.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. The entities that would be affected by these proposed
regulations are LEAs receiving Federal funds under this program, a
substantial number of which (over 90 percent) are small entities.
However, the proposed regulations would not have a significant
economic impact on those small entities because the proposed
regulations generally would decrease rather than increase any
regulatory burden and decrease the necessity for Federal supervision.
This is because the proposed regulations would establish a three-year
cycle, rather than the current annual cycle, for section 8002
applicants to submit information on the taxable adjacent parcels upon
which the Federal property valuation is based.
Overall, the regulations will benefit small LEAs by providing more
uniformity, consistency and reliability in Federal property valuation
for all section 8002 applicants, by allocating a proportion of the
Federal property for expected non-assessed or tax-exempt uses,
standardizing the minimum sample size of taxable properties and
providing more uniformity in the proportions of recently sold
properties that may be selected. These proposed changes will result in
a more equitable distribution of the limited funds available, including
for small LEAs.
In any case, although limiting the number of recent sales that an
LEA may use and other changes that would be made by these proposed
regulations may result in reduced Federal property valuations in some
cases, the proposed changes generally would have only a minor economic
effect on most section 8002 applicants, including small LEAs. This is
because small LEAs depend much more heavily on State and local revenue
than on Federal revenue. In addition, for most LEAs, these proposed
regulations affect only that portion of Federal section 8002 revenue
that is distributed under the last step of the payment formula (section
8002(h)(4)(B) of the Act), which is based on the maximum section 8002
payment calculation that takes into account the Federal property
valuation. Those affected section 8002 revenues constitute less than
one percent of the average total annual revenue from all sources
received by these small LEAs, and, for that reason, any reduction in
those revenues would not have a significant economic impact.
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 regulation that requires it (34
CFR 222.3) are approved under OMB number 1810-0036, with an expiration
date of June 30, 2008. 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.
Proposed Sec. 222.23 would make 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
[[Page 31598]]
reasons explained below, the Secretary believes that these changes
would not result in an increase in the paperwork collection burden.
Proposed Sec. 222.23(a)(3) and (c)(1) would 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 propose 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, proposed Sec. 222.23(c)(2)(i) would require 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 propose 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 payments 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 proposed Sec. 222.23(d)(1), moving from an annual
to a three-year sample selection cycle; and (2) in proposed Sec.
222.23(d)(2), limiting the number of recent sales that a local official
may select in each base selection year, which likely will lead to fewer
new selections of sample properties.
If you want to comment on the information collection requirements,
please send your comments to the Office of Information and Regulatory
Affairs, OMB, Attention: Desk Officer for U.S. Department of Education.
Send these comments by e-mail to OIRA_DOCKET@omb.eop.gov or by fax to
(202) 395-6974. You may also send a copy of these comments to the
Department representative named in the ADDRESSES section of this
preamble.
We consider your comments on these collections of information in--
Deciding whether the proposed collections are necessary
for the proper performance of our functions, including whether the
information will have practical use;
Evaluating the accuracy of our estimate of the burden of
the proposed collections, including the validity of our methodology and
assumptions;
Enhancing the quality, usefulness, and clarity of the
information we collect; and
Minimizing the burden on those who must respond. This
includes exploring the use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology; e.g., permitting electronic submission of
responses.
OMB is required to make a decision concerning the collections of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, to ensure that OMB gives your comments full consideration,
it is important that OMB receives the comments within 30 days of
publication. This does not affect the deadline for your comments to us
on the proposed regulations.
Intergovernmental Review
This program is not subject to Executive Order 12372 and the
regulations in 34 CFR part 79.
Assessment of Educational Impact
The Secretary particularly requests comments on whether these
proposed regulations would 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/news/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.gpoaccess.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: May 28, 2008.
Kerri L. Briggs,
Assistant Secretary for Elementary and Secondary Education.
For the reasons discussed in the preamble, the Secretary proposes
to amend part 222 of title 34 of the Code of Federal Regulations as
follows:
PART 222--IMPACT AID PROGRAMS
1. The authority citation for part 222 continues to read as
follows:
Authority: 20 U.S.C. 7701-7714, unless otherwise noted.
2. Section 222.21 is amended by revising the introductory text in
paragraph (a), and revising paragraphs (d)(1) and (e).
The revisions 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) Except as provided under paragraph (a)(2) of this section, the
Secretary's determinations and redeterminations of eligibility under
this section are based on the following documents:
(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
[[Page 31599]]
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.
* * * * *
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 for levying 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 proportionately 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 the amount of 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 7 and Table 7-2 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 Example 7 and Table 7-2 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 types of tax assessment classifications
representing 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, devoted to each of those tax assessment
classifications that represent the highest and best uses (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 LEA.
(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.
[[Page 31600]]
Table 1.--Proportion of Residential Category of Section 8002 Eligible
Federal Property Allocated to Non-Assessed or Tax-exempt Uses
------------------------------------------------------------------------
Eligible Federal
acres allocated
to expected use
Allocated category (col. 2
proportion 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 of each selected taxable adjacent
property that is recorded on the assessment records for that
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 exist 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 10 in number. In extremely rare circumstances, the local
official may use fewer than three parcels for a particular tax
assessment classification if doing so is determined by the Secretary
to be necessary and reasonable.
Example 2 (Minimum Sample Size of Adjacent Properties): The
eligible Federal property is surrounded by properties that are
classified for tax purposes according to their highest and best uses
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 exist. 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 10 properties for that
classification.
(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 equalization
factors, if relevant) and acres of the actual and any replicated
adjacent properties and 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--commercial
classification Value Acres Value per 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 for the
taxable portion of the expected use category by the number of acres
of eligible Federal property in 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
[[Page 31601]]
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 changes assessment classification,
becomes tax-exempt, or undergoes 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] TP02JN08.003
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] TP02JN08.004
(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] TP02JN08.005
If the resulting number is a fraction, the local official rounds
down to the nearest 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 ten taxable adjacent properties each for the residential and
commercial use categories, and 20 taxable adjacent properties for
the agricultural use category in determining 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,
ten 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 ten residential adjacent
properties selected, the local official may select only one recent
sale (ten 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
[[Page 31602]]
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......................... Proportion (percent) of recent 10% (.10) 6% (.06) 8% (.08)
sales for expected use category.
2......................... Total selected adjacent 10 10 20
properties.
3......................... Row 1 x Row 2.................... 1.0 .6 1.6
4......................... Number of ``recent sales'' local 1 0 1
official may include among 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 further 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 further than one mile from the perimeter of the eligible
Federal property or outside the LEA only in extremely rare
circumstances determined by the Secretary.
(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). In
determining the highest and best use, the local official also may
consider the most developed and profitable use for which the taxable
adjacent property is physically adaptable, if that use is legally
permissible and financially feasible, and for which there is a need
or demand in the near future.
(ii) The local official--
(A) May not base the highest and best use of taxable adjacent
property on potential uses that are speculative or remote; and
(B) 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 6 (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 7 (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, and 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
[[Page 31603]]
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 at
least the minimum required number of taxable adjacent properties
(generally at least ten) 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 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 at least 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
paragraphs (c)(2)(i) and (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 1,920 = 480) if the property was no
longer in Federal ownership. The Department believes that it may be
extremely speculative that 480 acres of the property would develop
into this number of residential properties, and that this result
would not reflect the local official's intention. In that case, 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 aggregate 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.
[[Page 31604]]
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 7-1 and 7-2 below:
Table 7-1.--Allocation of Section 8002 Eligible Federal Property to Non-Taxable and Taxable Uses for Determining Base Values
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proportion of Total acres Acres allocated
eligible Federal allocated to Proportion Acres allocated to taxable uses
Tax classifications of adjacent properties based on property property use allocated to non- to non-assessed and used to
highest and best use allocated to categories (col. assessed or tax- or tax-exempt determine base
property use 2 x eligible exempt uses uses (col. 4 x values (col. 3 -
categories acres) col. 3) 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 7-2.--Calculation of Section 8002 Base Values, Section 8002 Estimated Assessed Values (EAVs), and Aggregate Assessed Value
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal acres
allocated for Average value/ Base value of Section 8002 EAVs
Classification of adjacent parcels taxable use acre of taxable eligible Federal Assessment ratio and aggregate
(table 7-1, col. adjacent parcels property (col. 3 assessed value
6) x col. 4)
(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 Assessed Value)................. ................. ................. 133,090,000 ................. 92,577,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Authority: 20 U.S.C. 7702)
[FR Doc. E8-12233 Filed 5-30-08; 8:45 am]
BILLING CODE 4000-01-P