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Show in national parks, etc.) have been made by private users, then state and local governments have the authority to levy possessory interest taxes on their owners. Improvements placed on the land by the Federal Government should not be taken into consideration because, generally speaking, they are provided for the purpose of furnishing services to the region or locality in which they are constructed. Accordingly, the Commission believes that their benefits automatically outweigh any burdens they might impose. Period of Transition Recommendation 103: In a payments-in-lieu-of-taxes system, a transition period should be provided for states and counties to adjust in changing from the existing system. Under a payments-in-lieu-of-taxes system, state income might be significantly less than under existing revenue-sharing programs. New Mexico and Wyoming, for example, demonstrate the changes that might occur in connection with both the extent of total payments and the distribution of Federal payments. Mineral-leasing shared revenues are currently an important source of income to both state governments, and may total more than the in-lieu payments based on a percentage of tax equivalency.13 Because the Commission has recommended that in-lieu tax payments flow to the counties in which the lands are located, it must be noted that in Wyoming only 3 percent of the shared revenues are distributed directly to the counties, and in New Mexico, none. Both states, however, make large intergovernmental transfers to school districts for support of public education. The sudden suspension of revenue-sharing payments, such as those under the Mineral Leasing Act of 1920,14 might cause hardship on some state and local governments, particularly if there is a substantial reduction in the amount of payment. In such cases, payments should be phased so as to provide a gradual decrease over a period of years. These increased transitional Federal costs could be offset, at least in part, by similarly phasing incremental payments upwards over a short period of years to those states that would receive substantially more under the new system than under the old. In either event, payments should be adjusted to the basic system as soon as is practicable. 13 For comparison of payments under the revenue sharing program with an estimate of payments in lieu of taxes, see EBS Management Consultants, Inc., Revenue Sharing and Payments in Lieu of Taxes, Pt. 5. PLLRC Study Report, 1970. 14 30 U.S.C. § 181 et seq. (1964). Reclamation Fund The provisions of the Reclamation Law of 1902,15 as amended, and the Mineral Leasing Act of 1920,16 providing for certain receipts to be deposited in the Reclamation Fund, were designed to assure construction of large expensive irrigation projects required to permit development of the West. Generally, the Commission is opposed to earmarking of funds. However, we believe that the United States should not take any action that might interfere with the fulfillment of its commitment to the West. Once the commitment has been fulfilled, the earmarking should cease. Accordingly, we recommend that the earmarking of any portion of receipts to the Reclamation Fund be discontinued when repayments to the Reclamation Fund are sufficient to finance reclamation construction. Cost of Program The contractor's study, referred to above, indicated that it would cost the Federal Government approximately $190 million a year to make payments, based on full tax equivalency, to state and local governments for the lands for which the Commission is required to make recommendations. In 1966, for those same lands, $93 million was paid under existing revenue-sharing programs. The Commission recognizes an imperfection in the contractor's estimate. The tax equivalency was based on the General Services Administration's periodic Real Property Report17 in which estimates of land values are not made for tax purposes, do not follow a consistent approach in arriving at estimates, in some instances are crude approximations, and, with regard to acquired lands, carry the original acquisition cost even if they were obtained at nominal cost. For example, there is no indication that potential subsurface mineral values were ever considered in agency estimates of public domain lands. Nevertheless, while the Commission cannot embrace the $190 million estimate as a ceiling, it has no better means of obtaining such estimate at this time. It believes, however, that the total cost is irrelevant if fairness requires the compensating of state and local governments for protecting the national interest in lands considered to warrant retention in Federal ownership. It is a proper cost to be borne by all Federal taxpayers. 15 43 U.S.C. §391 (1964). 16 30 U.S.C. § 191 (1964). 17 General Services Administration. Inventory Report on Real Property Owned by the United States Throughout the World, June 30, 1966, Washington, D. C. 241 |