Counties Pressure Congress to Provide More Certainty With Federal Payments for Tax-Exempt Public Lands

After going into a spin, the private plane crashed in the Ridgway Reservoir on the afternoon of March 22, 2014. The pilot and four passengers onboard were killed.

The reservoir is in Ouray County, a 541-square-mile jurisdiction located amid southwestern Colorado's San Juan Mountains, which has a population of about 4,600 people, and encompasses rugged tracts of national forest.

After the plane crash, the county coroner was responsible for identifying the victims, and an autopsy of the pilot. The coroner’s office had a $36,891 budget last year and, according to Ouray County Commissioner Lynn Padgett, the tragic crash depleted these funds entirely.

But Ouray had a financial cushion to help cover the unexpected costs.

“We paid for this with PILT,” Padgett explained during an event at the U.S. Capitol on Sept. 10.

PILT is an acronym for the federal government’s Payments in Lieu of Taxes program.

The program is intended to help offset the property tax revenue that local governments lose because the federal public lands within their boundaries are tax exempt.

In some places, these federal lands might comprise more than 90 percent of a county’s land area, significantly reducing the amount of property that can be taxed. Especially in Western states, the payments from the program, while modest by some measures, can be important for county budgets, helping to pay for costs ranging from search and rescue operations to snowplowing.

But funding for PILT in the upcoming fiscal year, which begins on Oct. 1, will lapse if Congress does not act.

Padgett was among a group of county officials who recently visited Washington, D.C., to urge congressional lawmakers to shore up funding for the program. “PILT,” she said, “is vital to Ouray County.”

‘You Can’t Plan On It’

For the 2015 fiscal year, Congress provided $442 million for PILT payments to local governments across the United States, although $37 million of this money will not become available until Oct. 1.

For now, evidence of any broad opposition to the program on Capitol Hill is scant, and support for it crosses party lines.

Rep. Jared Polis, a Colorado Democrat who noted that 62 percent of his district is federal land, said that PILT “usually comes under attack from people who just don’t understand what it is.”

But it remains uncertain when and how future funding for the program will be secured. And the politics surrounding PILT are tangled with sensitive, and sometimes controversial, questions about whether the U.S. government should turn over control of more public lands to states.

“The issue at hand is: Who makes the decisions about how those public lands are going to be used?” Rep. Rob Bishop, a Utah Republican who chairs the House Committee on Natural Resources, told county officials at the Capitol Hill event Padgett attended. “Someone who lives in the county where that land is? Or someone who has a four hour flight to get back here to Washington to make that decision? I actually choose the person who’s living on the land.”

County officials, meanwhile, want Congress to do more than just extend PILT to cover the upcoming 2016 fiscal year. They want to see the program’s funding made mandatory, so it is not subject to the year-to-year whims of the congressional appropriations process.

“We never know what’s going to happen,” National Association of Counties director of public affairs, Brian Namey, said of the PILT funding process in recent years.

“If every year it’s like a rollercoaster, you have to go to the Hill on your hands and knees and ask for this money, it’s very difficult to plan a budget,” he added.

Rep. Chris Stewart, a Utah Republican who is a member of the House Committee on Appropriations, expressed confidence to the county officials who came to Washington that PILT funding would eventually materialize, but he offered less reassurance on the timing.

“We will get your PILT funding. I promise you we will. I’d like to get it now, I’d like you to know this week, or next month what your funding is going to be for next year,” he said. But because of the way the appropriations process is shaping up in Congress, Stewart conceded “that probably won’t happen.”

‘A Fairness and Equity Issue’

For Ouray, the fate of PILT is cause for concern. During the 2015 fiscal year, the county was slated to receive $346,018 from the program, according to U.S. Department of Interior figures.

That’s not an insignificant sum in a place with a tightly stretched $9.4 million budget.

Still reeling from the aftereffects of the Great Recession, the county has shifted the workweek for most public employees from five to four days in order to deal with sinking property tax revenues. Padgett said that without PILT, a three-day workweek might’ve become necessary.

But the program is about more than just scooping up extra federal dollars to backfill the county’s budget, according to Padgett.

“We look at this as being a fairness and equity issue,” she said.

Property taxes account for 41 percent of Ouray’s general fund revenue in the county’s 2015 budget. But nearly half of the land there is federally controlled, which would mean that it is tax exempt and therefore not included on the property tax rolls.

At the same time, these federal public lands can create costs at the local level.

Public areas in and around Ouray are popular destinations for outdoor activities. When spring comes, the county typically spends about $70,000 clearing snow from high alpine roads that lead to places like the Alpine Triangle and Yankee Boy Basin, which are frequented by hikers, 4x4 enthusiasts and other recreationalists. And, in past years, applying crushed rock to unpaved roads that provide access federal public lands has run Ouray about $150,000.

The county picks up the tab for other costs tied to the lands as well, according to Padgett, such as placing portable toilets at trailheads and providing emergency response services.

Payments in lieu of taxes, she explained, help to defray these types of expenses.

‘60 Cents on the Dollar’

The Department of the Interior has administrative authority over PILT. A formula that weighs factors such as population, other types of payments and the federal land acreage within a jurisdiction, determine the amount of money a local government is allotted each year.

Ushering in the program was the Payments in Lieu of Taxes Act, signed by President Gerald Ford in 1976. Annual funding was roughly $100 million during the 1980s and early 1990s, according to the National Association of Counties. Then, in 1994, local governments were able to successfully push for indexing the program’s payments to inflation.

Costs began to rise in the years that followed.

But for much of the time it has existed, PILT has been a discretionary program, and is funded through the annual appropriations process in Congress.

This means that even though funding for PILT might be authorized at a certain level based on what the Department of Interior formula says local governments should be paid, that same amount will not necessarily be allocated in appropriations legislation.

And from 1995 to 2007, that’s what happened.

During those years, appropriated funding consistently fell short of authorized levels, sometimes by more than one hundred million dollars, according to Department of Interior figures provided by the National Association of Counties.

“We had some years in the ’90s and 2000s, where PILT was receiving 60 cents on the dollar,” Chris Marklund, an associate legislative director for the group, said in a recent interview.

But that changed in 2008 when President George W. Bush signed the Emergency Economic Stabilization Act, which included language that made the program mandatory until 2012, ensuring that the full, authorized amount of funding would be distributed annually.

These days, the program is back on the discretionary side of the budget.

“The most immediate ask is to fully fund for the coming year,” Marklund said. But he added: “Ultimately what we’re asking for is a long-term mandatory funding solution.”

Difficult to Find $450 million

The current version of the House appropriations bill that covers the Interior Department includes $452 million for PILT in fiscal year 2016.

But the roughly $30 billion spending bill was pulled from the House floor in early July after a partisan spat broke out over amendments that would have barred using federal funds to pay for displaying the Confederate battle flag on federal lands.

Since then, Rep. Mark Meadows, a North Carolina Republican, has introduced a piece of legislation that, among other things, would provide $450 million of PILT funding for five years.

The bill has been referred to the House Agriculture and Natural Resources Committees. As of Sept. 13, it had three co-sponsors, two Democrats, and one Republican.

The Senate, meanwhile, has not offered up a firm commitment to appropriate funds for the program.

As chair of the Senate Committee on Energy and Natural Resources, and the Appropriations Subcommittee on Interior, Environment, and Related Agencies, Alaska Republican Lisa Murkowski is positioned to be a key player in discussions about PILT in the upper chamber.

Her own state also has a sizeable stake in how the debate over the program plays out. Alaska was allotted $26.2 million in PILT payments for fiscal year 2015.

“Senator Murkowski is supportive of fully funding PILT, but we need to find offsets to pay for it,” said Robert Dillon, a spokesman for Murkowski. “The Interior appropriations bill covers a lot of other important programs, and so it’s difficult in this budget environment to find $450 million.”

Dillon said Murkowski is seeking “other vehicles” to provide the money. “She is looking for a long-term solution,” he added. “Something that would relieve that annual concern that communities have about where the funding is going to come from.”

‘We Still Have Work To Do’

Two bills have been referred to the Senate Energy and Natural Resources Committee that would restore mandatory PILT funding. But both pieces of legislation seek to fund other programs as well. And whether they can gain traction among Republicans is questionable.

The more recent of the two bills is S. 1925, which is sponsored by first-term New Mexico Democrat, Sen. Martin Heinrich. Introduced on Aug. 4, the legislation has 14 co-sponsors—12 Democrats, along with Independent Sens. Angus King, Jr. of Maine, and Bernie Sanders of Vermont, who is also vying for the 2016 Democratic presidential nomination.

The earlier bill, S. 517, was introduced in February and is sponsored by Sen. Ron Wyden, an Oregon Democrat, who is also co-sponsoring the Heinrich bill.

Both pieces of legislation contain identical language regarding PILT.

The bills would also both extend the Secure Rural Schools program, which funnels money toward more than 700 counties located near national forests to help them pay for schools, roads and other services. Enacted in 2000, the program was designed to make up for reductions in the amount of federal timber harvest revenues going to these places.

Secure Rural Schools funding would also be extended under the House legislation introduced by Meadows.

One way Heinrich’s bill differs from Wyden’s is that it would also permanently authorize the Land and Water Conservation Fund, which mainly uses offshore oil and gas royalties to pay for conservation efforts, including land and water acquisitions by state and local governments.

Dillon said that Murkowski takes issue with the PILT legislation referred to the committee because “there’s no offset, there’s no way to pay for it, and that’s not sustainable.” The other problem in the senator’s view, he said, is that the bills go “way beyond PILT.”

He added: “Combining it with LWCF and SRS increases the challenge, and doesn’t make it any easier to fund.”

Although she has not signed onto either bill as a co-sponsor, Sen. Maria Cantwell of Washington, the top Democrat on the Energy and Natural Resources Committee, supports both, and backs permanent funding for PILT, a committee press secretary said in an email.

In remarks to the county leaders who visited Washington, D.C., Sen. Cory Gardner, a Colorado Republican who is also a member of the Energy and Natural Resources panel, said that a couple of years ago, during his time in the House, there was a “sagebrush rebellion” of sorts when he, and about 40 or 50 other lawmakers, went to the Speaker’s office and threatened to withhold support for other legislation if PILT funding was not secured.

“We were able to find a solution that year,” he said.

“Obviously in the Senate we still have work to do to make sure that we have a vehicle Sept. 30,” Gardner continued. But he added: “We’re committed to getting it done.”