On this very point, the Commission on Intergovernmental Relations, after completing its 2 years of study, stated: The States and the National Government share in the responsibility for avoiding actions which impair the financial ability of governments. Equity as between Federal and local taxpayers requires the National Government to make appropriate payments. These should be based largely on the property tax system, which is the main source of revenue. I realize that my bill offers but a temporary solution to a relatively new and vexing problem in the field of intergovernmental relationships. Nevertheless, it is a step closer to permanent solution of a problem which is presently disrupting local finances and functions. I, therefore, strongly urge your favorable consideration of any bill that will take care of this serious problem. Senator HUMPHREY. For the record, your bill, Senator, is S. 2377? Senator POTTER. That is right. Senator HUMPHREY. I think the record ought to show that a bill embodying the principles of your bill was reported out favorably, as I recall, last year? Senator POTTER. That is right, and, as I understand it, Mr. Chairman, a companion bill which was introduced in the House has been reported out recently by the House Government Operations Committee? Senator HUMPHREY. Yes; and the particular category of Federal properties there involved were those owned by Government corporations and then transferred to other Federal agencies. Senator POTTER. That's right. Senator HUMPHREY. And when they were owned by the Federal corporations, they were taxable? Senator POTTER. They were paying taxes. Senator HUMPHREY. As a result of the transfer of ownership, they get into another category of Federal properties, and the Federal Government no longer pays revenues on them to local governments? Senator POTTER. The chairman is correct. It has presented a great hardship on local communities, and particularly when you take a community like Adrian with a population of approximately 20,000. A loss of $87,000 plus in taxes is a great hardship on that small community. Senator HUMPHREY. Indeed it is, and, of course, this again points up the fact that where you have no general rule or policy on the part of the Federal Government, you have all these digressions which put a local community in an impossible situation. Senator POTTER. That is right. Senator HUMPHREY. Now here is your community of Adrian that was depending upon this revenue. Senator POTTER. That's right. Senator HUMPHREY. Then all at once without any less burden upon its facilities and upon its services, it loses $86,000, or $87,000 in tax revenue. Senator POTTER. They naturally went ahead and expanded their facilities to take care of this load, and finally found out there was no tax to be received to cover it. Senator MUNDT. Would this same thing hold true under the general legislation, Senator Humphrey, of a community that has quite a number of Government offices and agencies which rent office space from private landowners? And those buildings in turn of course pay taxes to local communities. We are moving in the direction of putting up Federal buildings with a concentration of Federal activities in regional offices. Would that Federal building then be in the purview of paying taxes to the local community? Senator HUMPHREY. This is one of the points we thought ought to be gone into, Senator, because of the lease purchase program. Under the lease purchase legislation the individual who owns the building and is leasing it to the Federal Government continues to pay taxes, but then all at once the tax base is lost, so it is all the more important therefore that we clarify this matter as to what the intent of Congress is and what the Government's policy will be. Under the present situation you will find one agency of Government, as we pointed out, that makes payments in lieu. The one across the street might not. This is one of the best examples. You find a community that, because of Federal impact following increased Federal activities, has gone ahead and expanded its local facilities to take care of the increased population, the increased burden upon its roads, its streets, its parks, its water system, its sanitary system. Then, all at once, by action of the Federal Government, what was thought to be taxable property or property upon which payments in lieu of taxes would be made, is no longer revenue-producing. You find yourself out on the end of the limb with no tax base at all. Senator MUNDT. What happened in Adrian, and which is a pretty dramatic and substantial question, almost certainly happened in hundreds of other communities at the time when these office buildings ceased to pay taxes, became tax exempt. Senator HUMPHREY. This category presents a tremendous problem. Senator POTTER. I want to thank the chairman for allowing me to appear. Senator HUMPHREY. The next witness is Mr. William R. MасDougall, the general manager of the County Supervisors Association of California. I believe Mr. MacDougall is here representing the National Association of County Officials. Mr. MacDougall, we are very pleased to have you appear before us. Am I correct in stating that you are here also representing the National Association of County Officials? Mr. MACDOUGALL. You are, Mr. Chairman. Senator HUMPHREY. You have just completed your meeting over at Richmond? Mr. MACDOUGALL. That is correct. Senator HUMPHREY. I imagine this subject was also discussed at your meeting? Mr. MACDOUGALL. It was the prime objective of the meeting. STATEMENT OF WILLIAM R. MacDOUGALL, GENERAL MANAGER, COUNTY SUPERVISORS ASSOCIATION, REPRESENTING THE NATIONAL ASSOCIATION OF COUNTY OFFICIALS, SACRAMENTO, CALIF. Mr. MACDOUGALL. Mr. Chairman and gentlemen of the committee, I ask leave to go through my prepared statement with some rapidity so that there will be more time to amplify on points which may not be set forth fully in the statement, and therefore I will ask permission to digress from the statement and to omit parts of it as I go through. Senator HUMPHREY. Your request, sir, is readily granted, and you may proceed as you desire. Mr. MACDOUGALL. Thank you, Mr. Chairman. My name is William R. MacDougall and I am secretary-treasurer of the western regional district of the National Association of County Officials with headquarters at Sacramento, Calif. While the statements herein made are in behalf of the western regional district of NACO, they are endorsed by the National Association of County Officials itself-their general counsel is here present today and represent the current policy of that organization. I have been requested specifically also to state that the views expressed are those of the Washington State Association of County Commissioners (Richard Watts, executive secretary) and those of the County Supervisors Association of California (James F. Lyttle, president). Both Mr. Watts and Mr. Lyttle have asked that the record show that these views are those of their organizations, and they are their personal views as well. The problem we wish to discuss today is that of relief of the huge burdens imposed upon America's thousands of local governments by virtue of ever-increasing Federal ownership of real property. The exemption from local taxation which accompanies Federal real property ownership has meant that Uncle Sam has long been a "free loader" at the boarding house of local government. In countless instances Federal properties and installations freely partake of the benefits and services of local government and pay nothing in return. This problem was largely one of academic interest until some 16 years ago. The increased pace of Federal property acquisitions-and that increased pace has certainly been described here dramatically today by Senator Kuchel when he covered a period of just 16 recent years in the State of California-this increased pace has driven home to localities in every State a realization of the need for payments in lieu of taxes on Federal real properties. The bill now before this committee is an effort to remedy the worst of the existing tax inequities. For the past 10 years the counties of the Nation have been actively engaged in seeking legislation which would provide payments in lieu of taxes on all Federal real property. The history of these 10 years has been crowded with resolutions and policy statements of approval by State, regional, and national organizations. There have been numerous resolutions by State legislatures urging the Federal Government to recognize and to remedy the impact of its vast property holdings. Typical of recent findings by State legislatures is Senate Joint Resolution 20 adopted by the Legislature of California just 2 months ago. This resolution reads in part as follows: Whereas the Federal Government, through its many agencies, continues to acquire vast holdings of land and improvements, particularly for military, experimental, and defense purposes, and since the Federal Government is under no constitutional obligation to pay taxes, the property thus acquired is removed from the local tax base; and Whereas not only has the Federal Government acquired considerable land for war and defense projects, but in recent years it has enlarged its holdings of public lands set aside for national parks, Indian reservations, forest reserves, experimental areas, and other similar purposes, which activity has been particularly noticeable in the 11 Western States of Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming, within which States the Federal Government has greatly expanded the public domain since 1937, now owning over 55 percent of all the land in these States; and Whereas, because general property taxation is the major source of revenue for counties, cities, school districts, and other local governmental units, the acquisition of property by the Federal Government has seriously impaired this source of revenue of local governmental units and consequently the financial stability of such local governments; and Whereas, while the acquisitions of additional Federal property has adversely affected the source of revenue of local government, at the same time they have also enlarged the local problems and responsibilities of furnishing many necessary public services, not only directly for Federal activities, but also for the large numbers of families being attracted to the sites of Federal projects; and Whereas Federal property ownership has had a crushing impact on local governments, striking at the very heart of local government: Now, therefore, be it Resolved by the Senate and Assembly of the State of California (jointly), That the Legislature of the State of California respectfully memorializes the President and Congress of the United States to enact legislation providing for payments to local governments in lieu of taxes on federally owned land. Many bills have been introduced into the Congress calling for piecemeal solutions-some of these bills were enacted and are today operating statutes. Nowhere in the 10 years has there appeared any condemnation of the principle that the Federal Government should make payments to local governments in lieu of the property taxes from which the Federal Government is exempt. These 10 years of work on the part of county government have not been in vain. The rough beginning approach that all Federal property should forthwith be placed on the tax rolls gave way soon to the idea that Federal tax exemption should continue but that in lieu payments should be made. In turn, this concept was subjected to many refinements as the problem was studied by outside tax authorities in addition to the many city, county, and school district organizations which felt the impact of Federal property acquisition. We believe that these years of thought and refinement of the general problem have produced a workable, equitable, and practical plan for in-lieu payments. It is that plan which is contained in the bill before this committee, S. 1566. Why in-lieu payments? This is certainly belaboring a point which is already, I am sure, clear in the minds of the members of this committee. The need for in-lieu payments by the Federal Government is inherent in the American way of financing local government. Most of the 3,000 counties have a single tax source-the ad valorem property tax. To a large extent this is true with respect to our cities. too. It is obvious that any reduction in the base of that single tax is bound to produce hardship of a permanent sort to the local government involved. Whenever the Federal Government acquires a property or develops highly its existing undeveloped properties, local governments and their tax base are affected. An ironic twist is added by the fact that the Federal acquisition and development brings with it increased demands upon the local government whose tax base has been eaten away. In the past 16 years the impact of new Federal acquistions and new uses of existing Federal properties has been terrific. We have all seen the Federal Government change from the role of a land disposer to the role of a landholder and, most recently, into that of a land acquirer. The Commission on Intergovernmental Relations reports: Early in 1953 it became obvious that the vastness of Federal holdings, the variety of their nature and the complexity of fiscal relations among American governments were such that a thorough top-level special study was required. The Congress obligingly created the now famous Commission on Intergovernmental Relations. After a slow but noisy start, this distinguished 25-member body undertook its vital and serious work. Senator HUMPHREY. That is an apt description, may I say. Mr. MACDOUGALL. Thank you, Mr. Chairman. So important was the subject of payments in lieu of taxes and shared revenues from Federal lands that the Commission created a special 11member Study Committee on the subject. And it is my understanding that the distinguished chairman here today was a member of the Study Committee and of the Commission it self. So we know that just a month ago the report of the Commission was issued. Among its many recommendations were important ones on payments in lieu of taxes. Accompanying the Commission's report was an excellent special report of the Study Committee comprising almost 200 pages. With respect to the subject of the bill before this committee the Commission has this to say: The Commission recommends that the National Government inaugurate a broad system of payments in lieu of property taxes to State and local governments. The most important class of properties on which such payments should be made is commercial or industrial properties. Special assessment payments and transitional payments in lieu of taxes should be made in certain cases. The Commission believes that these payments are necessary to help preserve financially healthy local government. Present tax immunities of Federal property have weakened many local governments. The States and the National Government share in the responsibility for avoiding actions which impair the financial ability of local governments. Equity as between Federal and local taxpayers requires the National Government to make appropriate payments. These should be based largely on the property tax system, which is the main source of local revenue. The study committee report contains the most exhaustive discussion of payments in lieu of taxes which has yet been made. It is the result of intensive work by all 11 members of the committee and its competent technical staff. Actual field investigations were made and representatives of local governments were consulted. The roster of the membership of this study committee is of interest. Of its 11 members only 3 could be said to represent local government. |