Fish and Wildlife Service: Compensation to Local Governments
Released: 2014-05-21T00:00:00

Introduction

Federal lands cannot be taxed by state and local governments. However, state and local governments have argued that federal lands are not only lost to the tax base, but also impose a burden on local taxpayers through demands for services such as law enforcement or search and rescue actions, which are commonly supported by local taxes. As a result, Congress has enacted several federal programs to offset the loss to the local tax base, even if the programs are not designed to offset that loss on a dollar-for-dollar basis. Congress is re-examining these programs for several reasons: continuing concerns expressed by local governments about the adequacy or fairness of the programs, rising payment levels based on current formulas, interest in decreasing the deficit, and expiration of mandatory spending for some of the programs.

Most of these programs are under the jurisdiction of the Forest Service (FS), the Bureau of Land Management (BLM), the Fish and Wildlife Service (FWS), and the Department of the Interior (DOI). The program for FWS lands in the National Wildlife Refuge System (hereinafter referred to as the System) was enacted in 1935 and has been amended extensively since that time. Like many federal land payment programs, its original emphasis was on sharing any revenue generated on the federal lands with local or state governments, as shown by its original name: the Refuge Revenue Sharing Fund (though now it is more commonly called the National Wildlife Refuge Fund, or NWRF). Some of the federal payment programs restrict local use of the funds to some specific purpose, such as roads or schools. Others allow the funds to be used for any governmental purpose; NWRF falls in the latter category. Many of these programs, including NWRF, have become increasingly complex over time.

The 1978 amendments to the program provided that NWRF payments to local governments are based on a complex formula; the authorized funding level varies from one year to the next, based on changes in the data used in the formula. The resulting authorization level has increased more than 400% between FY1991 and FY2013. (See Figure 1 .) In the same period, the amount of land potentially eligible for NWRF payments has gone from 86.3 million acres to 91.0 million acres, an increase of only 5.4% and clearly insufficient to explain the increase in the authorized funding level. The question is—what explains the large increase in the authorized levels? The answer, explained below, lies in the formula, particularly in payments for lands purchased by or donated to FWS.

The total payment a county receives for federal lands in its jurisdiction is further complicated by the interaction of NWRF and the Payments in Lieu of Taxes (PILT) program, a broadly applicable federal land payment program for county governments, which uses a different payment formula. PILT payments are managed by DOI.

Besides differing formulas, there is another distinction between NWRF and payment programs for FS and BLM lands. The FS and BLM payment programs for local governments have usually had sufficient revenues from the multiple uses of their lands to fund most of their payment programs. In contrast, FWS lands have never generated sufficient revenue to fund NWRF fully since the current formula was created in 1977. Supplements from annual appropriations were authorized, beginning with the 1980 payments. However, these supplements have fallen below the levels authorized in the formula in all years except 1981. Since 1982, NWRF payments have ranged from as much as 93% of the authorized amount in FY1991 to a low of 22% in FY2010. Partial payment under NWRF has meant that the effect on local revenues has been more pronounced in counties with FWS lands than in counties with other federal ownerships. This loss is one reason for some local governments' resistance to the creation of refuges or waterfowl production areas.

This report describes the key features of NWRF: the lands under FWS jurisdiction, the eligibility of most of those lands for NWRF payments, the sources of revenue for the fund, the payment formula for calculating an individual county's payments, the PILT payments available for certain FWS lands, some exceptions to normal authorized payment calculations, changing authorization levels, and falling annual appropriations. It concludes with a review of options for changes in the program.

What Lands Are Under the Jurisdiction of FWS?

Lands and waters under FWS jurisdiction fall in six management categories. (See Table 1 .) Three of these categories, taken together, constitute the National Wildlife Refuge System (150.3 million acres). The best-known and oldest parts of the system are the National Wildlife Refuges themselves. Another category is Waterfowl Production Areas, which are defined as "Refuge System lands comprised of small natural wetlands and grasslands that provide breeding, resting, and nesting habitat for millions of waterfowl, shorebirds, grassland birds, and other wildlife." Roughly 95% of WPA lands are in Iowa, Minnesota, Montana, North Dakota, and South Dakota. Coordination Areas are defined as "Refuge System lands managed by states under cooperative agreements between [FWS] and state fish and wildlife agencies" regardless of actual ownership of the land. These three categories, together forming the System, constitute 49% of the lands under FWS jurisdiction.

In addition to the three categories making up the System, there are three more categories of lands under FWS ownership or administration (157.0 million acres). Administrative Sites are "[FWS]-owned maintenance facilities, offices, and off-site visitor centers that are not located on Refuge System lands." National Fish Hatcheries are facilities "where fish are raised. Hatchery objectives are to replenish depleted stocks, to mitigate federal water projects, to assist with the management of fishery resources on federal and Indian lands, and to enhance recreational activities." National Monuments, including "marine national monuments are areas designated by Presidential Proclamation and established under the authority of the Antiquities Act of 1906.... For the purposes of this report, this category includes only the Service-managed or co-managed areas within a national monument that are outside the Refuge System. National monument areas within the Refuge System are counted in the 'National Wildlife Refuges' category total." The FWS lands and waters that are not part of the Refuge System constitute 51% of lands under FWS jurisdiction. With the System lands, they bring FWS land (and water) jurisdiction to 306.1 million acres.

FWS lands can be further categorized based on whether (a) they are public domain lands or acquired lands; (b) whether FWS has sole or primary jurisdiction over the lands or instead has only secondary jurisdiction; (c) for acquired lands, whether some other federal agency initially acquired the lands and then transferred them to FWS, or whether FWS acquired the lands directly from a non-federal source as either a gift or a purchase; and (d) whether FWS jurisdiction rests on an agreement, easement, or lease, rather than outright ownership of the land. (See Table 2 .)

Which FWS Lands Are Eligible for NWRF?

Only certain lands are eligible for NWRF payments. Criteria for eligibility are as follows:

For lands reserved from the public domain, payments to counties only if or when the lands in the refuge generated net revenues in the previous year. For acquired lands, including lands received as gifts, payments according to a formula involving four payment options (described below). See Table 3 for classes of acquired lands eligible for NWRF. Lands under the sole or primary jurisdiction of FWS. Lands (whether acquired or reserved) not otherwise excluded from payments. (See " Special Exceptions to the Rules .")

The following FWS lands do not receive NWRF payments:

Lands reserved from the public domain in those fiscal years when they generated no net revenues in the preceding year. Lands over which FWS has only secondary jurisdiction. (These are 1.6 million acres or 0.5% of all lands managed by FWS; of these, 0.6 million acres are reserved from the public domain, and 1.0 million acres were acquired by another federal agency.) Similarly, wildlife coordination areas (257,488 acres) are not eligible because they are managed by the states (under cooperative agreements) and not by FWS. Acquired lands in U.S. Minor Outlying Islands (54.9 million acres or 18% of area under FWS management). These areas are largely submerged lands; islands found in these areas are uninhabited for the most part. Lands in American Samoa (8.6 million acres or 3% of area under FWS management). These areas are also largely submerged lands. Any other submerged lands outside the jurisdiction of a state or territory; these lands are largely in national monuments.

Any given piece of land may be excluded for more than one reason. For example, 597,891 acres are excluded because they are public domain lands under only secondary jurisdiction of FWS, and therefore are not eligible for NWRF payments; even were they under primary jurisdiction of FWS, the lands would receive no payment unless they generate net revenues. Either condition would result in no payment. Moreover, exclusion may be temporary: FWS public domain lands may generate net revenues—and therefore NWRF payments—in some years and not in others.

What Are the Sources of Revenue?

NWRF payments to counties are mandatory, but only to the extent of receipts. The sale or lease of goods and services from FWS lands (public domain or acquired) are the chief sources of revenue. These include revenues from grazing, mineral development (though not oil and gas revenues from leases on lands reserved from the public domain), sale of forest products, and other activities. (See Table 4 .) In FY2012, these receipts totaled $7.3 million. The Secretary of the Interior deducts any direct FWS expenses incurred to generate the revenues from the fund; in FY2012, these deductions totaled $3.3 million, for a net of $4.0 million available for payment under NWRF in FY2013. To the extent that the permanently appropriated net revenues are insufficient to meet the amounts calculated under the payment formulas, the Refuge Revenue Sharing Act authorizes discretionary appropriations in annual spending bills to meet any shortfall. If amounts are still insufficient to meet the authorized level, then each county is paid a pro rata share of the amount authorized in the formula. From FY1978 to FY2012 net receipts have not been sufficient to meet the payment formula. (See Figure 2 .) Additional discretionary appropriations have more than doubled the available funds, but the totals of receipts and appropriations have provided less than the authorized level in all but one year (1981) since NWRF reached its modern form in 1978.

How to Calculate a County's NWRF Payment

To calculate the total authorized NWRF payment for the areas under FWS jurisdiction, several questions must be answered first for each county individually:

1. Does FWS have primary or sole jurisdiction (versus secondary jurisdiction) over the land? 2. Is the land reserved from the public domain, or was it acquired by the United States? 3. For both acquired and public domain land, what were the net receipts from the land? 4. For acquired lands only, what is the fair market value (FMV) of the land? And was the land acquired before September 30, 1977? If so, what was the purchase price?

With this information, each county's authorized level can be calculated, and the sum of these values provides the total authorized level for the entire program. Figure 3 shows the steps for calculating an individual county's payment.

Boxes A and B: Primary or Secondary Jurisdiction. NWRF provides a payment for FWS land that is under the sole or primary jurisdiction of the agency, but formulas differ for acquired lands versus reserved lands. There is no payment for lands under secondary FWS jurisdiction (Box B).

Box C: Reserved or Acquired. This distinction must be made because different formulas apply to the two types of lands.

Boxes D, E, and F: Reserved Lands Option. If the reserved lands have no net receipts, there will be no payment (Box E). If there are net receipts, counties are paid 25% of the net receipts (Box F). This is the only NWRF payment option for such lands. Depending on revenues and costs, these lands might generate payments in some years and not others. However, as noted previously, these lands are also eligible for PILT payments.

Box G: Amount Authorized. The result of the calculations, under either Box F or H, is the amount authorized.

Box H: Acquired Lands Options. Acquired lands generate payments based on the greatest of these four options:

Box H(1): $0.75/acre. Box H(2) : 0.75% of current FMV. Regulations describe procedures for determining FMV. The statute specifies that FMV is to be reappraised at least once every five years. While this option may be viewed as corresponding to local property taxes, the resulting payment is likely to differ from the amount that a private owner would pay in real property taxes. For example, property tax rates vary among jurisdictions, and range from 0.40% to 2.57%, according to one analysis. Box H(3) : 0.75% of the acquisition cost of the land for lands under FWS supervision on September 30, 1977. The current calculated refuge payments for lands acquired before September 30, 1977, cannot fall below the amount as calculated on September 30, 1977. At that time, the payment was 0.75% of the purchase price, not the fair market value. Box H(4) : 25% of net receipts. Expenses for producing the revenue or for activities related to revenue are deducted from gross receipts; expenses of general land or wildlife management are not.

Box I: Receipts Sufficient? Once the amount authorized is calculated (Box G), this amount is compared with the national total of receipts. Theoretically, if the net receipts are sufficient to meet the formula levels, then each county is paid the full amount (Box J). However, net receipts have never yet been sufficient to meet formula levels.

Boxes J, K, and L: Appropriate Additional Funds. If the net receipts are not sufficient to meet the formula, the authorizing statute allows annual appropriations to make up the difference. To date, Congress has approved additional funds to supplement the net receipts. (See Figure 2 .) If these supplements, plus receipts, are sufficient to meet the authorized levels, each county is paid the full amount under the formula (Box J). If not, each county receives a pro rata amount (Box L). Since the modern program began making payments in 1978, the additional appropriations, plus the net receipts, have fallen short of the authorized level except in FY1981, when funding reached 118% of the amount authorized in the formula. The decline appears to be an effect of the formula creating a growing authorization level, rather than marked reductions in annual appropriations. (See " Authorized Levels and Appropriations ," below for discussion.)

Calculating Payments: The PILT Overlay

While the PILT program is not exclusively for FWS lands and is not run by FWS, it does affect total federal payments to local governments for some FWS lands. Specifically, for FWS lands that are in the System and only for those reserved from the public domain (calculated by DOI at 85.2 million acres for the payments of FY2013), DOI calculates an additional payment under PILT. (See Boxes E, J, and L.) Any revenues paid to the county under NWRF are deducted from the PILT payment made the following year. PILT payments are mandatory spending through FY2014. For the FWS lands in question, the result is that when NWRF payments fall below the authorized level, the difference may be made up (possibly only in part, in years when PILT is not fully funded) by the PILT payment the following year.

Special Exceptions to the Rules

Besides the general criteria described above, there are also specific criteria that affect individual states or territories, or affect calculation of how many acres are eligible for NWRF payments or later PILT payments.

One of the exceptions occurs in Alaska. The FY201 3 Annual Report lists a total of 76,241,824 acres of FWS public domain land that would qualify for PILT payments. This total is based on new survey data, which the state disputes. As a result of the dispute, FWS reports a larger figure (80,342,130 acres) for the PILT calculations, based on a historic total previously used. Because of the complexity of the NWRF and PILT formulas, it is not clear how much greater a payment Alaska boroughs receive based on the older figures, nor which boroughs receive the greatest benefit.

In Hawaii, the acres of System lands reserved from the public domain land, shown in the FY201 3 Annual Report (254,418 acres), also differ from those used to calculate PILT. There is an unresolved dispute between FWS and the state about 252,511 acres of submerged lands. As in other areas, FWS does not include these submerged lands as eligible for NWRF and PILT. There remain 1,907 acres reserved from the public domain in the state that are not submerged; these acres are reported as eligible for PILT.

While the Refuge Revenue Sharing Act lists some territories as eligible for NWRF payments, American Samoa is not listed, and therefore it receives no payment. The 1,613 acres of System lands acquired initially by the U.S. Navy in American Samoa do not receive PILT payments either, both because they are acquired and because the territory is not defined as a unit of local government for purposes of PILT.

Authorized Levels and Appropriations

As shown in Figure 4 , the percent of the NWRF authorized level that has been paid to county governments has fallen steadily since 1991. Two factors help explain the decline. First, and most strongly, authorization levels calculated under the statute's formula have increased markedly. (See Figure 1 .) Second, total appropriations (net receipts plus annual appropriations) have declined in the last five years, although the decline shown in Figure 4 spans the last 20 years. As discussed below, the falling percent is primarily the result of the increasing authorization levels based on the formula in the statute. (See Figure 1 and Figure 2 .)

As Figure 3 graphically demonstrates, the NWRF statute has only a limited number of potential causes for the increasing authorization levels.

Are the net revenues increasing? If so, the increase would affect reserved lands with net revenues, and those acquired lands in counties paid under this option. But as Figure 2 shows, net revenues have been fairly constant, and have declined in recent years. Increases in net revenues cannot explain the increase in the authorization level. Are the acres of eligible FWS lands increasing—or, more accurately, are they increasing commensurate with the increase in authorization? Lands and waters under FWS jurisdiction jumped from 88.8 million acres in 1981 to 307.3 million acres in 2013. But the great bulk of this increase is in the marine environment, in waters under the jurisdiction of no state or county government; these submerged lands can have no effect on NWRF payments. Therefore, increases in eligible FWS lands can explain only a part of the increase in authorization levels. Payment under the $0.75/acre option for acquired lands seems inadequate to explain the rising authorization level as well, because the rate is constant, and as just noted, the increasing number of acres eligible for NWRF payments is not sufficient to account for the authorization increase. Payments tied to purchase price before 1977 also cannot increase. Is the fair market value increasing? Only a substantial increase in the FMV of the acquired lands is left to account for the quadrupling of the authorized level. Such an increase is not surprising, given the general rise in real estate values up until the peak of the market in about 2007. Moreover, because FWS lands are re-appraised at about five year intervals, it seems reasonable to hypothesize that falling real estate values of the past few years generally will soon lead to decreases in the authorized levels for NWRF payments, followed by further increases as property values recover.

In sum, increasing FMVs appear to account for a substantial fraction of the increasing authorization, aided to a lesser extent by some increases in the number of acres eligible for payments. As a result of increasing FMVs, counties with lands having high FMVs receive an increasing fraction of funds appropriated to the NWRF.

Possible Changes to NWRF

There are few proposals in the 113 th Congress to amend the NWRF program. Any effort to match the rapidly increasing authorization levels conflicts with increasing pressure to lower federal expenditures. For example, one recent issue has been whether to eliminate discretionary spending for NWRF. Specifically, for FY2012 through FY2015, the Administration proposed that Congress provide no annual appropriation for NWRF, allowing the program to draw funds based only on available receipts. If the proposal were accepted for FY2015, the Administration estimated that counties would receive approximately 6% of the authorized level. The Administration argued that the savings were justified, and that refuges added few costs to counties and provided economic benefits from increased tourism. Congress rejected the Administration's argument for each succeeding fiscal year. For FY2014, Congress appropriated $13.23 million, down 8.6% from the FY2011 level of $14.47 million ( P.L. 112-74 ), before the proposed elimination of annual appropriations. FWS estimated that net receipts, combined with the appropriation level approved by Congress, are sufficient for counties to receive 24.4% of the authorized level in FY2014.

Besides eliminating annual funding, other options that Congress might consider include the following (in order of increasing payments to county governments):

1. Eliminate NWRF, and make no FWS lands eligible for PILT. 2. Eliminate NWRF, but make all lands now eligible for NWRF also eligible for PILT. 3. Make all FWS lands now eligible for NWRF payments also eligible for PILT payments, without eliminating NWRF. 4. Change the compensation formula under NWRF to decelerate future growth in authorization levels as land values rise, to bring the formula into accord with historic appropriation levels (mandatory plus annual) or with some alternative authorization level. (Depending on the specific changes, this option might change its rank in this list.) 5. Fully fund the existing NWRF program.

If the first option were chosen, there would be no federal payment to counties based on the presence of lands under FWS jurisdiction. Such legislation might specify a different distribution of net receipts, or allow net receipts to be deposited in the U.S. Treasury.

If the second option were chosen, the authorized payments for all eligible NWRF acquired lands with an FMV over $338.67/acre would be reduced to $2.54/acre at most. Payments might be further reduced because of another PILT provision limiting payments based on county population levels. Public domain lands would be largely unaffected as they already receive PILT payments.

If the third of these options were chosen, public domain lands in the System would be unaffected because they already receive PILT payments. Those counties receiving their payments under the provision for 0.75% of FMV would likely increase their payments only marginally, because the top payment rate for PILT in FY2013 was $2.54/acre. At a 0.75% tax rate, any land with a FMV greater than $338.67/acre—a common occurrence in eastern states where the bulk of FWS acquired lands are found—would result in an NWRF authorized payment of more than $2.54/acre. So the added PILT payments would still likely represent only a modest fraction of the authorized NWRF payment level for refuge lands with high FMVs. The lands outside the System (administrative sites, national fish hatcheries, and the non-submerged lands in those national monuments outside the System), if they are in the public domain but generate no revenue, currently receive no NWRF payment and no PILT payment. Counties with such lands (about 3,660 acres nationwide in FY2013) would receive a PILT payment for the first time under this option.

If the fourth option were chosen, several changes to the NWRF formula could reduce the authorized amount. Because the authorized amount is increasing as more acquired land is compensated under the FMV provision and as FMVs have increased, changes in this provision would be essential to lower the authorized amount. The reduction could be accomplished by lowering the rate below 0.75%, placing a cap on per-acre compensation, or eliminating this feature altogether and setting all compensation at some fixed rate.

For the fifth option, fully funding NWRF, no change in the authorizing statute would be required. In FY2014, full funding would have required the annual appropriation to increase from $13.2 million to $72.6 million, a 549% increase. Future increases would depend on whether FMVs increase and, to a lesser extent, on changes in revenues from FWS lands. A similar end could be accomplished if Congress changes the program to mandatory spending. However, in a climate of continuing efforts to lower federal spending, achieving full funding under either option would face substantial difficulties.