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IMPACT AID - SECTION 8002

IMPACT AID - SECTION 8002. Payments Relating to Federal Acquisitions of Real Property. CURRENT 8002 RULES. Post 1938 loss of at least 10% of taxable land within the district May be accumulated over several years Loss of federal ownership of land counts as a deduction

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IMPACT AID - SECTION 8002

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  1. IMPACT AID - SECTION 8002 Payments Relating to Federal Acquisitions of Real Property

  2. CURRENT 8002 RULES • Post 1938 loss of at least 10% of taxable land within the district • May be accumulated over several years • Loss of federal ownership of land counts as a deduction • Land must have been on the tax rolls prior to federal takeover

  3. DETERMINING LOST PROPERTY TAXES • Highest and Best Use of adjacent property • Current assessment rules & tax rates • Certification by local official responsible for property taxes • Periodic audits by the Department of Education

  4. CLAIMS PAYMENT FORMULA • Step 1 - Foundation payment based on 61.4125% of 1994 payment ($12M) • Step 2 - Allocation based on percent of Highest & Best Use assessed value of each claimant ($3M) • Step 3 - Highland Falls (West Point), N.Y. equal to amount needed to fund 50% of claim but not to exceed roughly $2M

  5. CURRENT PAYMENT FORMULA - CONTINUED • Step 4 - Remaining annual funding is divided into two portions (25% & 75%) • Step 4A - 25% of funds distributed based on district’s percent of Step 1 payment to total payments in Step 1 • Step 4B - 75% of funds distributed based on district’s percent of claim to total claims

  6. ALLOCATION OF DOLLARS • Total Appropriation = $62M • Step 1 takes $12M, leaves $50M • Step 2 takes $3M, leaves $47M • Step 3 takes $2M, leaves $45M • Step 4A gets 25% of bal. or $11.25M • Step 4B gets 75% of bal. or $33.75M

  7. “OLD REGULATIONS” • Sample size left to local official to determine number to be used • Department allows valuation of property with buildings and assumption of annual sale • Supply and Demand economic questions not addressed • Role of non-taxable property not addressed

  8. EXAMPLE - 1 Wall, S.D. = 345 ADA; Highest & Best Use Assessed Value = $80M; Maximum Payment under Claim = $45M • Does it make sense that Wall should be claiming $130,000 per ADA in “lost property taxes”?

  9. NEW REGULATIONS • Effective Date: December 22, 2008. • Allows other records that the Secretary determines to be appropriate and reliable to establish eligibility of an LEA for 8002.

  10. NEW REGULATIONS • Requires a minimum sample size of 10 properties in each tax category. • Defines adjacent property to be within 2 miles of eligible 8002 property and within the boundaries of the LEA (Local Education Authority). Exception given by the Secretary under extremely rare circumstances.

  11. NEW REGULAIONS • Requires the local official to determine non-assessed or tax-exempt proportions for the 8002 property. • Establishes a 3 year life cycle for the sampled adjacent property. • Updating the values of those properties in the two succeeding years. • Limitation on the number of recent sales in the sample.

  12. NEW REGULATIONS • Individual parcels in the sample may only be replaced during the 3 year cycle if • A change in the character of the property • A change in assessment classification • A change to tax-exempt status

  13. NEW REGULATIONS • In determining the highest and best use, the local official considers the extent to which the 8002 property is • Physically adaptable to the expected uses. • Is that use legally permissible. • Is that use financially feasible. • Is there a need or demand in the near future.

  14. NEW REGULATIONS • In considering the highest and best use of adjacent taxable property, the local official may consider the most developed and profitable use for which the land is adaptable only if that use is legally permissible and financially feasible and there is a need or demand for it in the near future.

  15. VIEWING NEW REGULATIONS • The new regulations may be viewed at: • http://www.ed.gov/legislation/FedRegister • http://www.ed.gov/programs/8002/legislation.html

  16. STEPS IN DETERMINING EAV • The local official first categorizes the types of expected uses of the eligible 8002 property in each Federal installation or area based on the highest and best uses of taxable properties adjacent to the property (e.g. residential, commercial, agricultural, etc.).

  17. STEPS IN DETERMINING EAV • The local official allocates a portion of the acres of the eligible 8002 property to each of those expected uses.

  18. STEPS IN DETERMINING EAV • In determining the base value for each category the local official allocates a percentage to expected non-assessed or tax-exempt uses, such as public open space, schools, churches, roads, etc. This portion is based on the actual occurrence found in the adjacent property locations.

  19. STEPS IN DETERMINING EAV • The local official selects from each expected use category identified a minimum sample size of 10 taxable adjacent properties that represent the highest and best uses of the taxable properties.

  20. STEPS IN DETERMINING EAV • If at least 3 but fewer than 10 taxable properties are selected in each category the lowest per-acre value of the sample shall be replicated in the sampling until 10 values are achieved.

  21. STEPS IN DETERMINING EAV • When selecting sample properties for the base year the number of recent sales used is limited to the “number of recent sales in the jurisdiction(s) in each use category for the 3 most recent years divided by the total number of taxable properties in the category in the most recent year”.

  22. STEPS IN DETERMINING EAV • In utilizing the percent value for recent sales multiplied by the sample size the number of parcels shall be rounded down. Thus if the recent sales percent is 8% and a sample of 10 is selected, no recent sales may be included in the sample of 10 • (10 x 8% = .8 rounded down to 0)

  23. EXAMPLE Eligible 8002 property - 1000 acres • Local official determines adjacent property is 60% residential, 40% commercial. • 600 acres categorized as residential and 400 acres commercial. • Local official determines that 20% of residential is non-assessed or tax-exempt and 15% of commercial, so 120 and 60 acres respectively are excluded.

  24. EXAMPLE - CONTINUED • Local official selects sample of taxable properties (min. of 10). • If residential sample has a $100,000 per acre and commercial has a $250,000 value then the calculations are: 600 ac.-120 ac.= 480 x $100,000 = $48 million and 400 ac. - 60 ac = 340 x $250,000 = $85 million.

  25. EXAMPLE - CONTINUED • Apply appropriate assessment ratio for each category of property to determine the EAV (estimated assessed valuation). • Apply appropriate tax rate for category of property.

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