These videos cover the most essential Section 7002 information in case you are unable to attend a live training. Check out the transcript and related links below each video. The videos are best viewed in “Full Screen” mode, which is the square button to the right of the volume button.
Section 7002
This presentation will provide a brief overview of Section 7002, Payments for Federal Property. Section 7002 payments are given to school districts with substantial amounts of Federal property within their boundaries that was acquired after 1938. This Federal property is not taxable, which reduces the revenues available to pay for schools.
Let’s begin by looking at the basic eligibility requirements for Section 7002 funding, and how LEAs that have never applied before can document their eligibility.
Section 7002 reimburses LEAs for lost tax revenue from lands that were removed from the tax rolls after 1938. The federally acquired lands must equal at least 10% of the assessed value of your district at the time or times of acquisition. It is not 10% of the land; it is 10% of the value of the land. To prove eligibility, you will not only need to know the value of the land when it was sold or transferred to the Federal government, but the total value of the land within your school district boundaries the year that the Federal Government became the owner.
Some examples of common federal property claimed are Army Corps of Engineers properties, U.S. Fish and Wildlife and Forest Service properties, and some military installations. These are just examples; any kind of Federal property can be claimed if it meets the eligibility requirements.
For new LEAs who have not established eligibility, you’re going to need 3 things: the acquisition record, which is usually a deed, the assessed valuation record of the acquired property at the time it was sold or transferred to the Federal government, and the assessed valuation of the school district at the time of acquisition.
You’ll be organizing this information on forms called Exhibit A (which lists individual acquisitions) and Exhibit B (which summarizes acquisitions by year).
This form is the Exhibit A which details the individual acquisitions. You can see from the example that in 1938, the US acquired 800 acres from Steve Carter with an assessed valuation of $1,000. You can also see another 1938 acquisition and acquisitions that occurred in 1939 and 1940. Exhibit A shows the individual parcels that the Government acquired and their value at the time.
This form is the Exhibit B. Exhibit B is going to total those individual acquisitions by the year they occurred in terms of the number of acres and the value of those acres. Exhibit B also documents the value of all property in the entire school district for that year, which will allow us to calculate the percentage of the district’s assessed value that was acquired. Remember, to be eligible, the acquisitions need to equal at least 10% of the district’s value IN TOTAL. The Federal Government may have acquired the land over the course of multiple years. We add the percentages from each year.
You can see by year the total number of acres acquired, the assessed value of those acres, and the assessed valuation of the district for the year of acquisition. In this example, column E shows that the district met the 10% threshold as the acquisitions between 1938 and 1940 equaled 20.58% of the district’s value.
Next, we’ll look at how you would complete an annual application. Section 7002 applications are due on January 31 each year, unless that day falls on a weekend, in which case the deadline is the following Monday.
There are 5 different components of the application you’ll need to fill out. These are total eligible federal acres, any revenue you may have received based on federal activities on the federal property, the total acres in the LEA to include federal acres, the total taxable value of the LEA, and your tax rate for current operating expenditures.
Here is how to start a Section 7002 application for your LEA in the Impact Aid Grant System. Once you are logged in, you will find the button to do this on your home page. Click the button to start your application and you will be brought to a page asking you to confirm that you have all of the necessary user accounts set up to complete your application. Confirm that you do, and click submit. This will confirm the creation of the application, and its assignment to the users listed on the previous page. Now you can start your application
On the first page, you can review information about your LEA. You can download the application instructions and also ask your analyst a question. Please check the contact person and make sure that information is up to date. If it is not, go to LEAs on the top blue menu, click the name of your LEA, and then click the Update Core LEA Details button. Make any changes to the contact person, including updating their name, their email address, and any phone numbers. If there are no errors on the page, IAGS will confirm that your edits have been saved.
To return to the application click the home button. Please note that when I go back to the home page, the Start 7002 Application button is now gone. This is because the application was already started. I’ll now find it under my task list. Here you see two tasks listed. That’s normal, and it doesn’t matter which one you click to get back to the application.
Now I’m back to my first page and I see that my contact person details have been updated. I will now go to page 2 of the application: Federal Properties.
The first thing you’re going to do on page 2 is to enter the name of the eligible federal property, the taxing jurisdiction, and the number of eligible 7002 acres. LEAs that have applied before will have the eligible acres pre-filled, and you only need to edit the number if the Federal government has sold all or part of the property or acquired additional acres.
Here I’m demonstrating how to add additional property and acres to your application if necessary, though you will rarely need to do this. In this example, the property is an existing property. All I need to do is search the name of the property, the jurisdiction type, the jurisdiction, and enter the number of eligible acres. Please note that the number of eligible acres may be smaller than the total acres that the Federal government owns in your school district. Contact your analyst if you have any questions about the number of eligible acres you have in your school district. When finished with this table, I will go to page 3 which refers to federal revenue.
If you receive revenue from federal activities on your 7002 eligible federal lands, you will report it on the next table. Some types of revenue we typically see are for timber revenues, mining, Bankhead Jones, or flood control. You do not need to report revenue from the Department of ED, the Secretary of Defense for DOD schools, or Payments in Lieu of Taxes (PILT) funds you receive. In this example, I am indicating the source, agency, program or description, and funds received in total.
If your LEA is receiving revenue for the eligible Federal property, but the number of Impact Aid-eligible acres is smaller than the total number of acres that the Federal government owns in your district, you will need to prorate the revenue reported on your application.
Here’s how you prorate your revenue. This pie chart represents the total amount of federal land in the school district, in this case the Mark Twain National Forest. The green slice represents the actual ELIGIBLE 7002 acres. The total forest acres in the district total 10,000 acres, however, the ELIGIBLE 7002 federal acres are only 2,000 acres. Because the eligible 7002 acres represent 20% of the forest’s land area within the boundaries of the school district, you would only have to report 20% of the timber revenue you received. For example, this district received $20,000 in timber revenues, but they only report 20% of that amount on the Section 7002 application, which would be $4,000.
On the next few pages of the application, you’re going to enter the total number of acres in the district (to include the federal acres) and the total taxable value of the school district. Under taxable value, make sure you’re reporting the assessed value and not the appraised value of the real property in your district. Do not include any personal property values. Only report the assessed value of REAL property within your district. You will also upload a certification of taxable value form showing that your local tax assessor has provided you with these numbers. A sample form to use to get this approval is included with the application instructions.
Finally, you’re going to enter your current school year tax levy for real property for your current operating expenditures. DO NOT include capital outlay or debt service in your tax rate. Make sure you select the correct unit when you enter your tax rate. Some jurisdictions have a rate in a unit of “mills,” which can also be stated as dollars per thousand. Dollars per hundred is another common unit for tax rates. Once you enter this information, go to page 6.
If you have multiple tax rates, DO NOT simply add them together. You’ll need to complete the single tax rate form. This single tax rate will be for Impact Aid purposes only. To calculate a single tax rate, you’re going to need 2 things: the assessed valuation of your real property and the revenues you received for your current operating expenditures from that real property.
Here is an example of a district that has different tax rates based on property classifications. To convert multiple rates into a single rate for Impact Aid purposes, you’re simply going to divide the revenue the LEA derived from local real property taxes, by the total assessed value of the district. In this example the calculated single tax rate is 0.0057.
On the application review page, you will see all of the numbers you entered on the previous pages. Please note that you can still make any edits that you need to make to these numbers, for example adjusting funds received. At the bottom of the page, you’ll see a question about whether you intend to amend the application. If you know you will need to make changes before the amendment deadline of June 30, please say Yes. You can always amend your application later, even if you click No, but this helps your analyst prioritize your application review, if they know you will be making changes later. Once you are done editing the application, you will submit it forward for signature.
When it is submitted for signature, any user in your LEA with signatory privileges will get an email asking them to sign. In this example, I am able to sign the application, so I immediately see the signature task in my task list. I’ll click on the task and open it. Again, I’ll see the application review page with all of the numbers entered. Here, you can make any necessary changes. In this example, I need to update my funds received, so I click the box and enter the new numbers. You may need to enter an explanation for those changes. To do so, find the explanations box and click the “New Explanation” link. For the topic, choose “explanation” and enter in the necessary information to provide context of the change to the analyst reviewing the application. For this example, I received a change in revenue report from an auditor, and so I will indicate that in my explanation. At the bottom of the page, you’ll see all of the application assurances. Once you’ve read through those and are ready to submit, click the check box and sign the application by clicking the blue submit button. The Impact Aid Grant System will confirm that your submission went through and you should also get a confirmation email. When I go to the Home page, I will see that the application status is now in 7002 Application Review, which means it was successfully submitted.
If an applicant only wants to receive a foundation payment and forego their remaining funds payment, they can select the “Opt-Out” option on page 3 of their application. The Opt-Out option is for LEAs that find the data collection process burdensome and not worth the value of the smaller remaining funds payment. If the LEA chooses the Opt-Out option, they don’t need to provide total LEA acres, total taxable value, or tax rate.
The opt out option is NOT available for new LEAs or LEAs that receive other Federal revenue for the eligible acres.
This concludes our brief overview of the application process for Section 7002 grants. Remember, to complete an application, you’re going to need the total eligible federal acres, revenue received from Federal activities, the total acres in the LEA, the taxable value of the LEA, and the tax rate for current operating expenditures. For new applicants, we’re going to send you a request for acquisition and assessed valuation data to establish your eligibility. For more information about Impact Aid, please visit us at our website. There you will find other training videos, user guides, and copies of our live webinar slides.
This presentation will provide a brief overview of the payment formula for Section 7002 grants.
The first step of the payment calculation is to determine the school district’s maximum payment. The maximum payment is an estimated value of the eligible Federal property based on the average value of land in your district, and the revenue it brings to your district on a per-acre basis. As an example, the green shape is the school district and the dark blue area represents the eligible federal property within the school district. The non-federal areas of the district total 8,000 acres with a taxable value of $13 million. That gives the school district a per acre value of $1,625 per acre, or $13 million divided by 8,000.
So, we take that $1,625 per acre value of the district and multiply it by the 2,000 federal acres. That gives us an estimated taxable value of $3,250,000 for the federal property. Next, we multiply the estimated taxable value by the district’s tax rate and that gives us a maximum payment for this school district of $89,375. The maximum payment is not what the school district will receive, but finding this number is necessary to calculate what the school district will receive.
Every eligible LEA gets a Foundation Payment for section 7002. Once foundation payments are established, they remain static. If you apply and are eligible, you receive that same amount each year. School districts that received funding in 2009 had a foundation payment established using either their FY 2009 total payment or their average total payment for the four preceding fiscal years, whichever was higher, multiplied by 90%. Again, as long as the LEA applies annually and remains eligible, that is their foundation payment every year.
Here’s how the foundation payment is calculated for LEAs that did not receive a payment in 2009. First, for the most recently closed year, we divide the total Section 7002 appropriation by the total of all maximum payments. This will yield the appropriation percentage, which is the average percentage of each LEA’s maximum that we were able to pay in the most recent year. In this example, the appropriation for the prior year only covered 3.74% of an LEA’s maximum payment, on average. We then multiply the LEAs maximum payment for the first year of eligibility by the appropriation percentage to get the foundation basis. The foundation basis times 90% is the foundation payment. Just like for school districts that received a payment in 2009, once the foundation payment is established, it will remain the same each year.
After all eligible LEAs receive a foundation payment, we distribute any remaining appropriated funds proportionally based on the LEA’s maximum payment. In this example, the school district’s maximum payment is 0.04% of all of the maximum payments for every eligible section 7002 school district that year. We have $8.5 million left over after paying foundation payments, so we multiply that by the 0.04% and get a remaining funds payment of $3,400.
As we finish discussing the Section 7002 payment formula, we want to let you know about a few special situations that could change your payment.
There are different rules for how your maximum payment relates to the actual funding your school district receives, depending on whether your school district received a Section 7002 payment in 2009 or not. If you did receive a payment in 2009, you can still receive all of your foundation payment even if it exceeds your maximum payment plus the other Federal revenue you receive for the property. You will not receive a remaining funds payment, however. LEAs with foundation payments established after 2009 would have their foundation payment reduced if it exceeds their maximum and would also not receive remaining funds.
The second maximum payment cap is applicable to LEAs that receive both 7002 and 7003 funds. This cap says that the total of 7002 AND 7003 payments cannot exceed the greater of either their 7002 or 7003 maximum payments. So, we look at your 7002 maximum payment and we look at your 7003 maximum payment under 7003(b)(1), and determine which program gives you the largest maximum. That is the number to which we compare your actual payments. If the total 7002 and 7003 payments exceeds the greater of either of their maximum payments, LEAs that received a 7002 payment in 2009 will still get their foundation, but no remaining funds. For LEAs that did not receive a payment in 2009, the foundation payment would be reduced to the maximum payment level and the district would receive no remaining funds.
In recent years, we have not had to do this, but in the event we don’t receive enough funds to pay all foundation payments in full, we would ratably (or, proportionally) reduce the foundation payments for each LEA.
For districts that undergo a consolidation or annexation, at least one of the former districts must have been eligible to receive a payment in fiscal year prior to consolidation or annexation. We would request legal documents showing evidence of the reorganization. The newly organized LEA’s foundation payment will be 90% of their prior year payment and they won’t be eligible for remaining funds.
This concludes our brief overview of the payment formula for Section 7002 grants. For more information about Impact Aid, please visit us at our website. There you will find other training videos, user guides, and copies of our live webinar slides.