Az counties get $31.5 million for federal lands
Property tax program’s future uncertain
WASHINGTON — Arizona counties last week received $31.5 million from the Interior Department to compensate them for federal lands on which they cannot collect property taxes.
But while some local governments “live or die” by the annual federal payment in lieu of taxes (PILT) money, its future is uncertain. The program is currently only guaranteed through next year.
“It’s critical for us,” said Yuma County Administrator Robert Pickels. “We rely very heavily on property tax revenues, and we need something to replace that.”
Yuma County had the largest PILT payment in the state, getting $3.25 million. Only Greenlee and Santa Cruz counties received less than $1 million, getting $816,028 and $777,268, respectively.
Arizona got the fourth-highest PILT payment in the nation this year. California got the most, at more than $38 million, followed by Utah with $34.6 million and New Mexico’s $32.9 million.
The payments make up for the fact that counties can’t collect property taxes on federally owned lands. The money can be vital for Arizona’s rural counties, some of which rely on PILT for nearly 20 percent of their general-fund revenues.
“You live or die by this PILT money,” said Graham County Supervisor Mark Herrington, whose county got more than $2.6 million.
The program began in 1977, but full appropriations for it have been rare. Herrington said that until recently, it was common to receive only two-thirds of an award.
Advocates for PILT hailed provisions in the Emergency Economic Stabilization Act of 2008 that guaranteed full PILT funding until 2012. But that guarantee ends after next year, leaving local governments guessing.
“A private citizen or business can’t decide year to year, ‘Well, things don’t look good. I’m going to pay only two-thirds of my taxes,’” said Ryan Yates, a spokesman for the National Association of Counties.
With prolonged federal budget problems looming, future funding is uncertain. A proposal to cut PILT funding by 75 percent in the current budget was voted down earlier this year in Congress.
While the need for PILT is straightforward, the process to calculate the awards is not.
The Interior Department calculates three figures when determining what counties will receive: a ceiling payment, an option A and an option B. The department makes the calculations each year to adjust for inflation and fluctuations in population and acreage.
The ceiling payment is calculated by multiplying the county’s population by a sliding-scale fee. For counties with 5,000 residents, the scale starts at $162.98 per person; for every 1,000 people above that amount, the fee gets slightly smaller, topping out at a ceiling payment of $65.20 per person in counties of 50,000 people.
Larger counties get the same ceiling rate as those with 50,000 people. Counties with fewer than 5,000 people are not subject to a ceiling, but have their payments calculated on option A or B.
Option A is the lesser of the ceiling payment and the eligible acreage times a dollar amount — $2.42 this year. Payments received by the county the previous year for certain federal revenue sharing programs are deducted from that amount.
Option B doesn’t deduct for any payments from the previous year, but it’s the lesser of the ceiling payment and the acreage multiplied by a lower dollar amount — 33 cents this year.
Counties may choose the option that gives them the larger payment.
Sometimes counties are not aware of all the factors in the calculation, and their payment is suddenly smaller one year.
Yavapai County received $2.2 million in 2009 and $2.8 million this year, but last year it got $853,278. Santa Cruz County got only $322,344 last year, down from $1 million in 2009.
They spent money from the Secure Rural Schools Program that they did not think would count against their 2010 PILT payments. It did.
And the calculations don’t always appear equitable. While Yuma County received $3.25 million for just over 1.5 million acres of land, Mohave County got $3.24 million for four times as much land.
“We get people asking, ‘Why is an acre in this county worth more than an acre in my county?’” said Yates.