VALUE OF LAND, BUILDINGS, AND STRUCTURE AND
FACILITIES REPRESENTED AS SHARES OF TOTAL
FEDERAL REAL PROPERTY VALUE, 1978

al practice of acquiring as much private land as possible "regardless of need, alternative land control methods, and impacts on private landowners."1

The incidence of federally owned properties varies widely across the 50 states. They are located in both rural and urban areas, and are industrial and nonindustrial, residential and commercial, permanent and semipermanent. Some of them provide largely local services, while others are regionally or nationally oriented. Some profoundly affect the fiscal and economic base of their communities, while others have only the most minor of impacts.

The one generalization that can best be made regarding the array of federally owned property is that there is no guiding principle regarding the extent to which the federal government as a property owner should contribute to the financial support of state and local governments. Some local governments share in the revenues generated by federal establishments operating within their borders, primarily from mineral leasing or from the sale of grazing, farming, and forestry rights to private interests. On other properties, Congress has recognized a responsibility for a partial or full payment in lieu of taxes (PILOT) to state and local governments as compensation for property taxes foregone. For some of its instrumentalities, such as its various banking and credit institutions, the federal government has authorized the full range of direct state/local taxation. Most commonly, however, the Congress has declared the U.S. government exempt from both direct state/local taxation as well as from any in lieu of tax responsibility. This is true despite the fact that, over the years, its own committees and study groups have recommended enactment of some form of uniform payment system to compensate all states and localities for the effect of the federal presence on property tax revenues. Indeed, in 1969, the Joint Economic Committee of the U.S. Congress, arguing "only basic equity," urged that Congress make payments in lieu of real property taxes on property owned by both the U.S. government and foreign governments (embassies, consulates, missions) in the U.S.2

It should be recognized, of course, that the federal government already does "pay" property taxes not in its role as a property owner,

but as a lessee of private real estate. In fact, in 1978 approximately $320 million was paid in this manner, and distributed among various taxing jurisdictions according to the mix of leasehold vs. ownership decisions made by the separate U.S. government agencies and instrumentalities throughout the country.

In short, the federal payment and tax system is a patchwork of uncoordinated programs. The federal establishment could use similar amounts of real property in each of ten different localities and, depending on a host of different institutional factors, pay different amounts of tax revenues or in lieu payments or no payment-to each of the ten jurisdictions.

This diversity of the federal government's definitions of its taxable (including payments in lieu of taxes) status relative to state and local jurisdictions creates critical policy questions. They concern not only the lease vs. own-type of considerations mentioned above, but also other major issues, such as (1) the equity of taxing private property owners while exempting federal agencies when both derive local public service benefits, and (2) the effect of the tax exemption on the federal government's use of land and on the local tax base.

In view of these issues, the ACIR has undertaken, in two separate studies, a detailed examination of the nature of the current system by which the federal government compensates or fails to compensate-state and local governments for the presence of federally owned tax exempt properties.

The first of these Commission reports, published in 1978, was an analysis of the adequacy of federal payments to local governments for specific types of tax exempt federal lands administered by the Bureau of Land Management, the Forest Service, the Army Corps of Engineers, the Bureau of Reclamation, and the National Park Service.3 Specifically, the study evaluated the payment programs directed largely toward the western U.S. counties under various receipts-sharing and guaranteed peracre payment programs as provided for under the Payments In Lieu of Taxes Act of 1976. This law, P.L. 94-565, covers National Forest lands, as well as most other types of federal open spaces. P.L. 94-588, enacted shortly thereafter, expanded, from "net" to "gross,"

the income from National Forests subject to sharing.

Despite the breadth of coverage of that report-nearly 90% of federal public lands were included-it left unexamined the question of how "nonopen space" federal properties, including both land and improvements, should be treated in our intergovernmental fiscal system. This group of real properties includes office buildings, post offices, military bases, special purpose facilities, as well as the undeveloped lands not under the jurisdiction of the agencies cited in the 1976 act. These federal holdings present another set of issues regarding federal land acquisition and management practices, the adequacy of current compensatory payment programs, and the impact of these federal properties on our intergovernmental fiscal system.

Accordingly, the Commission requested that the staff undertake an examination of the intergovernmental implications of these additional federal properties with specific attention directed to the question of whether Congress should enact a broad-based system of payments in lieu of taxes (PILOT) designed to compensate state and local governments for the federal presence.

This report addresses that request. Specifically, it examines whether a federal payment should be made on the value of properties owned by the federal government and its agencies and instrumentalities, or whether it is preferable to maintain the current system. The study presents an analysis of the conceptual, quantitative, and administrative issues associated with existing and proposed payment programs.

Chapter 2 begins with a discussion of the judicial (taxable) status of federal properties, and then describes the nature of the special federal payment programs designed to compensate some states and localities for property tax revenues foregone because of exempt holdings.

The nature and scope of the base needed to design a uniform real property PILOT system is examined in Chapter 3. Because the study focuses solely on "nonopen space" real properties, the PILOT base is defined here to exclude land such as that used for flood control and navigation, historic sites, parks (including urban parks), forest and wildlife, reclamation

and irrigation, grazing, roads or bridges (unless contained within a federal establishment), and monuments and memorials. The PILOT base also excludes land in the public domain (land which was originally placed in U.S. ownership by virtue of its sovereignty and which has never left federal ownership, including lands obtained by the government through exchange of public domain lands).

Once this base is determined, Chapter 4 establishes a normative framework for evaluating alternative justifications given for a real property tax equivalency PILOT, and the PILOT proposal is evaluated according to various equity, efficiency, and adminstrative considerations. In addition, alternative bases for a taxequivalency PILOT are discussed.

The main text of the report concludes in Chapter 5 with a detailed discussion of the current methods employed by the government to inventory and value its real property holdings, and then presents information regarding the cost and geographic distribution of the PILOT if it were enacted on a property tax equivalency basis.

MAJOR CONCLUSIONS

A number of major conclusions have been drawn by the Commission staff based on the research findings associated with the broad scope of this study. These conclusions are:

A. The federal government lacks any procedure that permits it to know the current value of its real property holdings in the U.S. Except for the estimates for 1978 made in this report, there is no inventory of the total value of tax immune federal property. In order to receive useful information for policy regarding the federal government's property wealth, Congress must require that the General Services Administration make major adjustments in its methods of collecting information.

There is a great need to develop new policies and improve basic management practices for information relating to federal property holdings. In spite of the fact that it is the largest landlord in the country, the U.S. government

has not only failed to keep track of its facilities' locations; but, also, it lacks the necessary information to maintain properly and evaluate the condition of its holdings and their community impact. The General Services Administration (GSA), which has the primary responsibility for "ownership" and management of federal properties, does not maintain accurate information regarding the location, nature, or cost of federal real property. Because of this inadequacy in basic recordkeeping, additional employee and training resources should be allocated for the purpose of maintaining accurate, complete, and current information on each of the federal government's holdings.

In its present form, GSA's Annual Inventory of Real Property Owned by the U.S. Throughout the World is of questionable value to federal property management and planning efforts. Although it is the federal government's primary source of information on its real properties, inventory records are incomplete and include only historical cost data which are of little use for current property analyses. Systems analysts and data managers at GSA frequently do not receive accurate or timely information on federal holdings from other reporting agencies and do not have adequate staff resources to manage the computer systems which are used for federal property inventory.

Authority for preparing the GSA real property inventory is contained in the Federal Property and Administrative Services Act of 1949 (63 Stat. 377), as amended, and is continued at the request of the U.S. Senate Committee on Appropriations. The GSA accordingly provides a detailed listing of real property owned and leased by the federal government inside and outside the U.S., including the cost to the U.S. government for each holding. Published at the end of each fiscal year, three GSA reports list those properties used by both military and civilian agencies at the end of the preceding fiscal year. They are:

1) Detailed Listing of Real Property Owned by the United States and Used by Civil Agencies Throughout the World;

2) Detailed Listing of Real Property Owned by the United States and Used by Military Agencies Throughout the World; and

3) Summary Report of Real Property

Owned by the United States Throughout the World.

The third document condenses most of the information in the other two by reformatting tables and highlighting certain statistical summaries with appropriate narrative. Other real property inventories are also compiled annually by each branch of the armed forces.

The GSA is responsible for reporting on general purpose buildings (such as office buildings and warehouses) that are occupied by a federal agency or agencies upon determination by GSA, and are maintained and serviced by GSA. The other reporting agencies are those which have control of, and authority to assign and reassign the use of any portion of, federal property and, in the case of special purpose buildings, those agencies having control of building management and operation. As the agency responsible for inventory, however, GSA must file and code each agency report, yielding the hefty detailed inventories, with thousands of pages, as noted above.

The detailed inventory of federal real property is organized by federal agency and, within the U.S., by state and city. It lists the type of property, predominant usage class, and location (state, city, and county) for each installation, which is the reporting entity. Installations vary in size and type, ranging from a national park or a hydroelectric project to a single office or vacant lot, each property entry being identified as "land," "buildings," or "structures and facilities." An installation can also be a combination of these types of property without the use (usage code) of each parcel being coded separately. Following this basic organization, the report details other federal property management information, such as the year in which the installation was acquired or constructed, the floor area (by square feet), acreage (to the nearest tenth of an acre), and the original cost of each parcel of land, building, structure, or facility.

In conducting this research study, the ACIR staff used GSA's inventory extensively. It found that several major improvements and quality controls on the base are necessary if the data are to be useful in future analysis of current property holdings. In this regard, at least three substantive and procedural proposals can