by Logan Finney, Idaho Reports
Idaho lawmakers met with a Utah-based tech firm this week they hired to appraise the state’s federal lands, with hopes that the $250,000 pilot project will bolster calls to increase federal payments to counties.
About 63% of the land in Idaho is federally controlled. State and local governments cannot levy property taxes on federal lands, so the federal government distributes payment in lieu of taxes – or PILT – instead.
Legislators contracted with the company AEON AI last year to assess just how much in property taxes the federal lands in three Idaho counties would generate if they were privately owned. According to the report, the federal government is paying out about eight or nine times less than it should be.
Congress originally conceived of PILT funding with the intention of fully replacing the property tax revenues that local governments cannot collect from untaxable federal lands. The payments have generally increased with inflation, but real estate values have increased at a much higher rate than general inflation since the program was created in 1976. However, much of the land is remote without access to city services or is otherwise unsuitable for development.
“Until now, neither the federal government, nor the state had the technological capabilities of valuing the millions of acres of land in a timely manner. This necessitated a PILT formula that, not surprisingly, did not take into account the actual value of the lands or their highest and best uses,” the report says.
“We are real estate developers with an economic background,” CEO Mark Cressler told the federalism committee on Thursday. “The computer doesn’t really care if it’s a single parcel or multiple.”
The Idaho pilot program last year analyzed about 1.3 million acres of federal land in Boundary, Clearwater and Canyon counties. If all the land was deemed taxable “recreational” property, according to the company, the land could have generated more than $16 million in property tax revenue for the three counties – far greater than the $1.8 million they collectively received from PILT.
“In 2005 it would have been impossible, and in 2010 it would have hardly been accurate. But now, with mass computing power,” Cressler said, “there’s no reason not to know the value of the property.”
The final report details four specific federally owned parcels as examples of the data tool that lawmakers commissioned: one parcel in Canyon County, one in Clearwater County, and two in Boundary County.
“Idaho is a non-disclosure state for real estate transactions. This means that buyers and sellers of real property do not have to publicly disclose the sale price of their transactions. This makes market analysis on real estate extremely difficult,” the report says. “However, through a strategic relationships and partnerships with third party public and private data sources, we are able to include current sales and lease comparables, as well as building vacancy data in the algorithm.”
The report calculates that for a 145-acre parcel of U.S. Forest Service land on the western city limit of Elk River, Clearwater County receives a $153.39 PILT payment but would receive $1,321 in property taxes from a private owner.
“While there could potentially be a number of potential uses for this parcel considering it’s adjoining the boundaries of the city, based on the other sections clearly being harvested in the area, we believe this site could be a location for timber production,” the report says. “It should also be noted that this is just one of many adjacent federal parcels that could be utilized in a similar fashion.”
The report shows Canyon County received a current PILT payment of $350.71 for a 120-acre parcel south of Nampa, which AEON AI estimates would bear $10,158 in property taxes in its current state. If the parcel was fully “built out” for development, the company projects up to $256,519 in property taxes.
“This parcel is surrounded by vast amounts of private, agriculture and residential land for miles in any direction. This peculiar location begs the question as to why it is a federally owned property in the first place. That fact notwithstanding, we believe the current suitable property use for this parcel, from a taxation standpoint, should be either agricultural or low density residential,” the report said.
The land in question is the Military Reserve Shooting Range operated by the Nampa Rod & Gun Club.
“Nampa Rod & Gun Club was established in 1927 to operate the outdoor facility,” according to the club’s website. “The land was given to the gun club by Executive Order of President Roosevelt. The area that is the current range was a military training facility as far back as the early 1900’s and was used as an impact area for the Artillery Corps.”
Boundary County gets a current PILT payment of $20.03 for the site of the Bonners Ferry Ranger District. A private owner would pay $365.10 in property taxes on the land, AEON AI projects, and redeveloping the property as low density residential would yield up to $30,963 in property taxes. That number does not account for the cost of the potential owner redeveloping the property.
“Having said that, given the property has substantial frontage along a highway, is a corner location, and appears to have access to the rail line to the west, one could easily justify a commercial or industrial use on this site,” the report says.
For another 48-acre section of Forest Service land in Moyie Springs, Boundary County received $89.45 in PILT funding. AEON AI projects the parcel would bear $1,631 in property taxes and could yield up to $25,599 in property taxes if it was developed as low density residential.
“The disparity is obviously quite significant. The question becomes, now what?” Cressler said.
The company will provide Legislative Services Office staff with training on how to use the data portal, and lawmakers appeared excited to take advantage of the results moving forward.
“I really appreciate you guys working on this. It’s a great program.” said Rep. Sage Dixon, R-Ponderay, who co-chaired the Committee on Federalism last year when the pilot program contract was signed.
Rep. Wendy Horman, R-Idaho Falls, said “we often get dinged” when Idaho is compared to the states back east, where less than 1% of the land is controlled by the federal government.
“Of course you can spend more money per pupil, because you can generate more money,” Horman said.
Cressler told lawmakers that he believes there is growing momentum among the western states to push the federal government for higher payment in lieu of taxes.
“We’ve worked with Arizona, we’ve had conversations with California, Montana, Nevada. It has almost been complete bipartisan consensus, that value in being able to define what these lands are worth and taking it back to the Department of Interior and starting a conversation,” Cressler said.
Even without the data insights generated by AEON AI, western policymakers have been beating the drum for higher PILT payments for a long time.
“We’re receiving slightly more than a dollar an acre,” former U.S. Senator Larry Craig said Thursday.
Craig worked on the program during his tenure in Washington D.C., and said it is a vital funding stream for rural counties with a high proportion of federal lands. However, it was typically uncertain whether PILT would continue to be funded from year to year.
“From 2008 to 2015, PILT was mandatory,” Craig said. “It is required and mandatory again [since 2018], and there is some effort to tie an inflationary factor to it.”
U.S. Sens. Mike Crapo, R-Idaho, Jim Risch, R-Idaho, and Mike Lee, R-Utah, introduced legislation during the March 2021 congressional session to modernize the program, but Craig said a standalone bill hasn’t been reintroduced yet this session.
“Their staff is aware of your study of the three counties,” Craig told state lawmakers. “It’s going to be very helpful.”
He also said the committee makeup in D.C. will affect the chances of improving the PILT program, like it did during his time in Congress when they increased funding and reworked the distribution formula.
“We made those things happen because we were westerners. Don’t miss those opportunities when they come along,” Craig said.
U.S. Rep. Mike Simpson, R-Idaho, issued a press release last month celebrating securing full funding for the PILT program in the fiscal year 2024 appropriation bill for the U.S. Department of the Interior.
“As Chairman of the Interior and Environment Appropriations Subcommittee, I have the unique opportunity to influence federal policies that directly impact Idaho and support rural counties. PILT programs are a lifeline for our local communities nationwide, and I am proud to continue to advocate for this critical funding,” Simpson said in the release.
PILT payments to Idaho have increased slightly in recent years, from $34.5 million in fiscal year 2021 to $38 million in fiscal year 2023, but the distribution is based on a sliding scale of population and acreage.
Lower PILT payments due to low population have long been a source of frustration for rural Idaho counties, Idaho Association of Counties executive director Seth Grigg told Idaho Reports last year.
Editor's note: PILT payment totals in this story have been updated.
Logan Finney | Associate Producer
Logan Finney is a North Idaho native with a passion for media production and boring government meetings. He grew up skiing, hunting and hiking in the mountains of Bonner County and has maintained a lifelong interest in the state’s geography, history and politics. Logan joined the Idaho Reports team in 2020 as a legislative session intern and stayed to cover the COVID-19 pandemic. He was hired as an associate producer in 2021 and they haven’t been able to get rid of him since.