B-130426, FEBRUARY 13, 1957, 36 COMP. GEN. 592

B-130426: Feb 13, 1957

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

WAS CONSTRUCTED DURING THE EARLY PART OF WORLD WAR II BY THE RECONSTRUCTION FINANCE CORPORATION. IT IS LOCATED A SHORT DISTANCE WEST OF THE NORTHERLY END OF MOUNTAIN LAKE (A BODY OF WATER OWNED BY A LOCAL PUBLIC UTILITY COMPANY) AND IMMEDIATELY ADJACENT TO THE CITY OF GRAND PRAIRIE. AT THE TIME THE PLANT WAS BUILT. IT WAS IN AN UNINCORPORATED PORTION OF DALLAS COUNTY SOME SEVEN MILES WEST OF THE CITY LIMITS OF THE CITY OF DALLAS. SINCE THE ANNEXED AREA WAS SEVERAL MILES FROM THE THEN CITY LIMITS OF DALLAS. IT WAS NECESSARY TO CONNECT IT TO THE CITY IN SOME MANNER. THIS WAS ACCOMPLISHED BY INCLUDING IN THE ANNEXATION A STRIP OF LAND TEN FEET WIDE AND FIVE MILES LONG WHICH RAN FROM THE CITY TO ROUGHLY THE NEAREST POINT ON THE PERIMETER OF THE AREA WHICH THE CITY WISHED TO INCLUDE WITHIN ITS CORPORATE LIMITS.

B-130426, FEBRUARY 13, 1957, 36 COMP. GEN. 592

STATES - PAYMENTS IN LIEU OF TAXES - FORMER RECONSTRUCTION FINANCE CORPORATION PROPERTY TRANSFERRED TO NAVY A MUNICIPALITY WHICH DOES NOT FURNISH ANY OF THE CUSTOMARY COMMUNITY SERVICES (POLICE OR FIRE PROTECTION, POWER, WATER AND SEWAGE DISPOSAL) TO A GOVERNMENT-OWNED PLANT AND HAS NOT HAD THE PROPERTY ON ITS TAX ROLLS MAY NOT BE REGARDED AS SUFFERING AN UNDUE OR UNEXPECTED BURDEN AS THE RESULT OF THE TRANSFER OF THE PLANT FROM THE RECONSTRUCTION FINANCE CORPORATION TO THE NAVY DEPARTMENT IN 1947 SO AS TO BE ENTITLED TO PAYMENT IN LIEU OF TAXES AUTHORIZED BY THE ACT OF AUGUST 12, 1955, WHICH ADDED SECTIONS 701- 704 TO THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949.

TO THE SECRETARY OF THE NAVY, FEBRUARY 13, 1957:

YOUR LETTER OF JANUARY 11, 1957, FROM THE ASSISTANT SECRETARY OF THE NAVY ( MATERIAL), REQUESTS OUR DECISION AS TO WHETHER THE NAVY MAY MAKE PAYMENTS IN LIEU OF TAXES TO THE CITY OF DALLAS, TEXAS, UNDER PUBLIC LAW 388, 84TH CONGRESS (69 STAT. 721; 40 U.S.C. 521-524) WITH RESPECT TO THE NAVAL INDUSTRIAL RESERVE AIRCRAFT PLANT, DALLAS, TEXAS.

THE RECORD SHOWS THAT THE NAVAL INDUSTRIAL RESERVE AIRCRAFT PLANT, DALLAS, WAS CONSTRUCTED DURING THE EARLY PART OF WORLD WAR II BY THE RECONSTRUCTION FINANCE CORPORATION. IT IS LOCATED A SHORT DISTANCE WEST OF THE NORTHERLY END OF MOUNTAIN LAKE (A BODY OF WATER OWNED BY A LOCAL PUBLIC UTILITY COMPANY) AND IMMEDIATELY ADJACENT TO THE CITY OF GRAND PRAIRIE, TEXAS. AT THE TIME THE PLANT WAS BUILT, AND UNTIL SHORTLY BEFORE ITS TRANSFER TO THE NAVY, IT WAS IN AN UNINCORPORATED PORTION OF DALLAS COUNTY SOME SEVEN MILES WEST OF THE CITY LIMITS OF THE CITY OF DALLAS.

IN OCTOBER 1947 THE CITY OF DALLAS ANNEXED ALL OF MOUNTAIN LAKE AND CERTAIN ADDITIONAL NEARBY AREAS WHICH INCLUDED THE NAVAL INDUSTRIAL RESERVE AIRCRAFT PLANT. SINCE THE ANNEXED AREA WAS SEVERAL MILES FROM THE THEN CITY LIMITS OF DALLAS, IT WAS NECESSARY TO CONNECT IT TO THE CITY IN SOME MANNER. THIS WAS ACCOMPLISHED BY INCLUDING IN THE ANNEXATION A STRIP OF LAND TEN FEET WIDE AND FIVE MILES LONG WHICH RAN FROM THE CITY TO ROUGHLY THE NEAREST POINT ON THE PERIMETER OF THE AREA WHICH THE CITY WISHED TO INCLUDE WITHIN ITS CORPORATE LIMITS.

ON DECEMBER 1, 1947, THE RECONSTRUCTION FINANCE CORPORATION TRANSFERRED TITLE TO THE ENTIRE PLANT TO THE NAVY DEPARTMENT AND THE BUREAU OF AERONAUTICS ASSUMED MANAGEMENT CONTROL THEREOF.

THE RECORD ALSO SHOWS THAT DURING THE TIME THE PROPERTY WAS OWNED BY THE RECONSTRUCTION FINANCE CORPORATION AD VALOREM REAL ESTATE TAXES WERE ASSESSED BY AND PAID TO THE GRAND PRAIRIE INDEPENDENT SCHOOL DISTRICT AND THE COUNTY OF DALLAS. HOWEVER, DUE TO THE FACT THAT THE PROPERTY WAS TRANSFERRED TO THE NAVY DEPARTMENT BEFORE IT WENT ON THE TAX ROLLS OF THE CITY OF DALLAS NO TAXES WERE EVER ASSESSED BY OR PAID TO THE CITY OF DALLAS.

THE RECORD ALSO SHOWS THAT EVEN THOUGH THE PLANT IS NOW WITHIN ITS CITY LIMITS, DALLAS HAS NEVER FURNISHED NORMAL COMMUNITY SERVICES TO THE PLANT. EXCEPT FOR THE STRIP LINKING THE PLANT TO THE CITY OF DALLAS, ALL THE LAND AROUND THE PLANT WAS WITHIN THE JURISDICTION OF THE COUNTY OR THE CITY OF GRAND PRAIRIE AT THE TIME OF ANNEXATION. ALTHOUGH THE CITY OF DALLAS HAS SINCE ANNEXED ADDITIONAL LAND BETWEEN THE PLANT AND ITS CITY LIMITS PROPER, VEHICLES TRAVELING FROM DALLAS TO THE PLANT MUST TRAVERSE ALMOST FOUR MILES OVER THE HIGHWAYS OF THE CITY OF GRAND PRAIRIE AND THE COUNTY OF DALLAS AND THEY ACTUALLY ENTER THE PLANT FROM A GRAND PRAIRIE STREET. BECAUSE OF THIS, DALLAS CANNOT AND DOES NOT FURNISH POLICE OR FIRE PROTECTION FOR THE PLANT, NOR DOES THE DALLAS SEWERAGE SYSTEM OR ANY OTHER COMMUNITY FACILITY LEAD TO OR SERVE THE PLANT.

PUBLIC LAW 388, 84TH CONGRESS, DIRECTS VARIOUS DEPARTMENTS AND AGENCIES OF THE FEDERAL GOVERNMENT TO MAKE PAYMENTS IN LIEU OF TAXES WITH RESPECT TO CERTAIN PROPERTIES TRANSFERRED TO THEM FROM THE RECONSTRUCTION FINANCE CORPORATION ON OR AFTER JANUARY 1, 1946.

IT HAS BEEN CONSISTENTLY HELD BY THE COURTS OF THE UNITED STATES AND THE VARIOUS STATES THAT FEDERAL PROPERTY IS NOT, IN THE ABSENCE OF SPECIFIC AUTHORIZATION BY THE CONGRESS, SUBJECT TO TAXATION BY STATES OR LOCAL GOVERNMENTS. M-CULLOCH V. MARYLAND, 4 WHEAT. 316; VAN BROCKLIN V. TENNESSEE, 117 U.S. 151.

THE CITY OF DALLAS HAS SUBMITTED A CLAIM FOR PAYMENTS IN LIEU OF TAXES UNDER SECTION 703 OF PUBLIC LAW 388, 84TH CONGRESS (69 STAT. 721; 40 U.S.C. 523), WHICH PROVIDES THAT:

WHERE REAL PROPERTY HAS BEEN TRANSFERRED ON OR AFTER JANUARY 1, 1946, FROM THE RECONSTRUCTION FINANCE CORPORATION TO ANY GOVERNMENT DEPARTMENT, AND THE TITLE TO SUCH REAL PROPERTY HAS BEEN HELD BY THE UNITED STATES CONTINUOUSLY SINCE SUCH TRANSFER, THEN ON EACH DATE OCCURRING ON OR AFTER JANUARY 1, 1955, AND PRIOR TO JANUARY 1, 1959, ON WHICH REAL PROPERTY TAXES LEVIED BY ANY STATE OR LOCAL TAXING AUTHORITY WITH RESPECT TO ANY PERIOD BECOME DUE, THE GOVERNMENT DEPARTMENT WHICH HAS CUSTODY AND CONTROL OF SUCH REAL PROPERTY SHALL PAY TO THE APPROPRIATE STATE AND LOCAL TAXING AUTHORITIES AN AMOUNT EQUAL TO THE AMOUNT OF THE REAL PROPERTY TAX WHICH WOULD BE PAYABLE TO EACH SUCH STATE OR LOCAL TAXING AUTHORITY ON SUCH DATE IF LEGAL TITLE TO SUCH REAL PROPERTY HAD BEEN HELD BY A PRIVATE CITIZEN ON SUCH DATE AND DURING ALL PERIODS TO WHICH SUCH DATE RELATES.

IF THIS SECTION OF THE STATUTE ALONE IS CONSIDERED, THE LANGUAGE BEING CLEAR AND UNAMBIGUOUS, IF WOULD SEEM THAT THE CITY OF DALLAS HAS A VALID CLAIM TO THE PAYMENTS--- FOR THE NAVAL INDUSTRIAL RESERVE AIRCRAFT PLANT WAS TRANSFERRED TO THE DEPARTMENT OF THE NAVY ON DECEMBER 1, 1947, WHICH IS SUBSEQUENT TO JANUARY 1, 1946, AND THE TITLE TO SUCH PROPERTY HAS IN FACT BEEN HELD BY THE UNITED STATES CONTINUOUSLY SINCE SUCH TRANSFER. SECTION 703 OF THE STATUTE APPEARS TO REQUIRE PAYMENTS IN LIEU OF TAXES IN ALL INSTANCES WHERE REAL PROPERTY HAS BEEN TRANSFERRED ON OR AFTER JANUARY 1, 1946, FROM THE RECONSTRUCTION FINANCE CORPORATION TO ANY GOVERNMENT AGENCY. SUCH AN INTERPRETATION SEEMS TO DO VIOLENCE TO THE INTENT AND PURPOSE OF THE ACT AS CONTAINED IN SEC. 701, 40 U.S.C. 521, ENTITLED " DECLARATION OF POLICY" AND ALSO AS CONTAINED IN THE LEGISLATIVE HISTORY OF THE ACT. SECTION 701 PROVIDES THAT:

THE CONGRESS RECOGNIZES THAT THE TRANSFER OF REAL PROPERTY HAVING A TAXABLE STATUS FROM THE RECONSTRUCTION FINANCE CORPORATION OR ANY OF ITS SUBSIDIARIES TO ANOTHER GOVERNMENT DEPARTMENT HAS OFTEN OPERATED TO REMOVE SUCH PROPERTY FROM THE TAX ROLLS OF STATES AND LOCAL TAXING AUTHORITIES, THEREBY CREATING AN UNDUE AND UNEXPECTED BURDEN UPON SUCH STATES AND LOCAL TAXING AUTHORITIES, AND CAUSING DISRUPTION OF THEIR OPERATIONS. IT IS THE PURPOSE OF THIS TITLE TO FURNISH TEMPORARY MEASURES OF RELIEF FOR SUCH STATES AND LOCAL TAXING AUTHORITIES BY PROVIDING THAT PAYMENTS IN LIEU OF TAXES SHALL BE MADE WITH RESPECT TO REAL PROPERTY SO TRANSFERRED ON OR AFTER JANUARY 1, 1946.

THE TRANSFER OF THE NAVAL INDUSTRIAL RESERVE AIRCRAFT PLANT ON DECEMBER 1, 1947, FROM THE RECONSTRUCTION FINANCE CORPORATION TO THE NAVY DEPARTMENT DID NOT IN FACT "REMOVE SUCH PROPERTY FROM THE TAX ROLLS" OF THE CITY OF DALLAS; IT DID NOT CREATE "AN UNDUE AND UNEXPECTED BURDEN" UPON THE CITY OF DALLAS AND DID NOT CAUSE "DISRUPTION OF" THE CITY'S OPERATIONS.

THE PLANT WAS NEVER ON THE TAX ROLLS OF THE CITY OF DALLAS. THOUGH THE CITY OF DALLAS ANNEXED THE PROPERTY IN OCTOBER 1947 AT WHICH TIME TITLE TO THE PROPERTY WAS IN THE RECONSTRUCTION FINANCE CORPORATION NEVERTHELESS THE LAW OF THE STATE OF TEXAS PROVIDES THAT ONLY THAT PROPERTY IS TAXABLE WHICH IS ON THE TAX ROLLS ON JANUARY ST OF EACH YEAR. VERNON REVISED CIVIL STATUTES OF THE STATE OF TEXAS. TITLE 122, CHAPTER 6, ARTICLE 7151 PROVIDES:

ALL PROPERTY SHALL BE LISTED FOR TAXATION BETWEEN JANUARY 1 AND APRIL 30 OF EACH YEAR, WHEN REQUIRED BY THE ASSESSOR, WITH REFERENCE TO THE QUANTITY HELD OR OWNED ON THE FIRST DAY OF JANUARY IN THE YEAR FOR WHICH THE PROPERTY IS REQUIRED TO BE LISTED OR RENDERED * * *

SEE HEDGECRAFT V. CITY OF HOUSTON, CIV. APP., 239 S.W.2D 828, WHICH HELD THAT THE STATUS OF PROPERTY FOR TAXATION IS FIXED BY LAW ON JANUARY 1 OF EACH YEAR. ON JANUARY 1, 1948, TITLE TO THE PROPERTY HERE INVOLVED WAS IN THE UNITED STATES AND HENCE THE PROPERTY WAS NOT PLACED ON THE TAX ROLLS OF THE CITY OF DALLAS.

FROM THE PURPOSE OF PUBLIC LAW 388, AS SET FORTH IN SECTION 701, IT IS CLEAR THAT CONGRESS INTENDED THAT PAYMENTS IN LIEU OF TAXES BE MADE TO THOSE LOCAL TAXING AUTHORITIES WHERE REMOVAL OF THE PROPERTY FROM THE TAX ROLLS CREATED AN UNDUE AND UNEXPECTED BURDEN AND DISRUPTION OF ITS OPERATIONS. SUCH IS ALSO THE INTENT OF CONGRESS AS SET FORTH IN THE LEGISLATIVE HISTORY OF THE LAW.

HOUSE REPORT NO. 1453, TO ACCOMPANY H.R. 6182 (WHICH BECAME PUBLIC LAW 388) AT PAGE 3, READS:

CERTAIN COMMERCIAL OR INDUSTRIAL-TYPE PROPERTIES HAVE BEEN ON THE STATE AND LOCAL TAX ROLLS AS PROVIDED BY AN ACT OF CONGRESS. BY THE ACCIDENT OF TRANSFER FROM THE RECONSTRUCTION FINANCE CORPORATION TO ANOTHER GOVERNMENT DEPARTMENT THEY HAVE BEEN REMOVED FROM SUCH TAX ROLLS WITH AN ADVERSE EFFECT UPON LOCAL FINANCIAL STRUCTURES WHICH IS UNJUSTIFIABLE. LOCAL GOVERNMENTS HAVE COMMITTED THEMSELVES TO, AND HAVE MADE SUBSEQUENT EXPENDITURES IN MANY INSTANCES FOR LOCAL GOVERNMENT SERVICES ON THE BASIS OF TAX REVENUES DERIVED FROM REAL PROPERTY TAXES, INCLUDING PROPERTY FORMERLY OWNED BY THE RECONSTRUCTION FINANCE CORPORATION. THE REMOVAL OF THESE PROPERTIES FROM THE REAL PROPERTY TAX ROLLS HAS UNDOUBTEDLY CREATED A REAL HARDSHIP IN THESE COMMUNITIES.

IN THE HEARINGS BEFORE THE COMMITTEE ON GOVERNMENT OPERATION, HOUSE OF REPRESENTATIVES, 84TH CONGRESS, FIRST SESSION ON H.R. 6182, ON P. 17, MR. MEADER SAID:

* * * THE FEDERAL GOVERNMENT ON THIS LIMITED CLASS OF PROPERTY IS MAKING PAYMENTS IN LIEU OF TAXES TO LOCAL BODIES FOR THE SERVICES RENDERED ON A LOCAL BASIS TO THE PLANT OWNED BY THE FEDERAL GOVERNMENT.

ON PAGE 30, MR. DONOHUE SAID:

THE PRECISE INJUSTICE OCCURS WHEN A LOCAL COMMUNITY CANNOT TAX FEDERAL GOVERNMENT-OWNED PROPERTY WITHIN ITS BOUNDARIES, ALTHOUGH IT FURNISHES ESSENTIAL SERVICES, SUCH AS HIGHWAYS, SEWER DISPOSAL, FIRE AND POLICE PROTECTION, SCHOOL FACILITIES, SNOW REMOVAL, STREET LIGHTING, AND MANY OTHER ALLIED SERVICES TO THE OPERATION OF THE PLANT, WITH RESULTANT HEAVY TAX INCREASE UPON THE LOCAL RESIDENTS. * * *

IN THE INSTANT CASE, THE CITY OF DALLAS IS FURNISHING NONE OF THE COMMUNITY SERVICES CUSTOMARILY FURNISHED AN INDUSTRIAL PLANT BY THE LOCAL MUNICIPALITY. THE CITY FURNISHES NO POLICE OR FIRE PROTECTION, NO LIGHTS, NO WATER AND NO SEWAGE DISPOSAL FACILITIES. THE COMPANY OPERATING THE PLANT SUPPLIES POLICE AND FIRE PROTECTION, FOR WHICH THE NAVY IS PAYING AND IT IS INFORMALLY UNDERSTOOD THAT WATER IS SUPPLIED FROM WELLS ON THE PROPERTY. IN SHORT, THE CITY OF DALLAS PROVIDES NO SERVICES FOR WHICH PAYMENTS IN LIEU OF TAXES ARE ORDINARILY MADE. SUCH PAYMENTS TO THE CITY OF DALLAS WOULD CONSTITUTE A WINDFALL; NOT A PAYMENT TO ALLEVIATE A HARDSHIP OR BURDEN. HOWEVER, PAYMENTS ARE BEING MADE UNDER PUBLIC LAW 388 TO THE COUNTY OF DALLAS AND THE GRAND PRAIRIE INDEPENDENT SCHOOL DISTRICT, POLITICAL SUBDIVISIONS TO WHICH TAXES WERE BEING PAID AT THE TIME OF THE TRANSFER OF THE PROPERTY TO THE NAVY.

IN THE LIGHT OF THE FOREGOING THE QUESTION ARISES AS TO WHETHER THE LEGISLATIVE INTENT MAY PREVAIL OVER WHAT APPEARS TO BE THE VERY CLEAR AND UNAMBIGUOUS LANGUAGE OF PUBLIC LAW 388.

THE COURTS HAVE LONG SINCE REJECTED THE THEORY THAT THE LITERAL CONSTRUCTION OF A STATUTE MUST BE FOLLOWED EVEN THOUGH IT MAY LEAD TO ABSURD CONSEQUENCE.

ALL LAWS SHOULD RECEIVE A SENSIBLE CONSTRUCTION. GENERAL TERMS SHOULD BE LIMITED IN THEIR APPLICATION AS NOT TO LEAD TO INJUSTICE, OPPRESSION OR AN ABSURD CONSEQUENCE. IT WILL ALWAYS THEREFORE BE PRESUMED THAT THE LEGISLATURE INTENDED EXCEPTIONS TO ITS LANGUAGE, WHICH WOULD AVOID RESULTS OF THIS CHARACTER. THE REASON OF THE LAW IN SUCH CASES SHOULD PREVAIL OVER ITS LETTER. UNITED STATES V. KIRBY, 7 WALL. 482, 486.

IN HOLY TRINITY CHURCH V. UNITED STATES, 143 U.S. 457, 472, THE COURT REJECTED THE LITERAL CONSTRUCTION OF A STATUTE SAYING:

IT IS THE DUTY OF THE COURTS, UNDER THOSE CIRCUMSTANCES, TO SAY THAT, HOWEVER BROAD THE LANGUAGE OF THE STATUTE MAY BE, THE ACT, THOUGH WITHIN THE LETTER, IS NOT WITHIN THE INTENTION OF THE LEGISLATURE, AND THEREFORE CANNOT BE WITHIN THE STATUTE.

AGAIN IN UNITED STATES V. PUBLIC UTILITIES COMMISSION OF CALIFORNIA, 345 U.S. 295, 315, THE COURT SAID:

WHERE THE LANGUAGE AND PURPOSE OF THE QUESTIONED STATUTE IS CLEAR, COURTS, OF COURSE, FOLLOW THE LEGISLATIVE DIRECTION IN INTERPRETATION.

WHERE THE WORDS ARE AMBIGUOUS, THE JUDICIARY MAY PROPERLY USE THE LEGISLATIVE HISTORY TO REACH A CONCLUSION. AND THAT METHOD OF DETERMINING CONGRESSIONAL PURPOSE IS LIKEWISE APPLICABLE WHEN THE LITERAL WORDS WOULD BRING ABOUT AN END COMPLETELY AT VARIANCE WITH THE PURPOSE OF THE STATUTE.

THE PURPOSE OF PUBLIC LAW 388, 84TH CONGRESS (69 STAT. 721; 40 U.S.C. 523) AS CLEARLY SET FORTH IN ITS LEGISLATIVE HISTORY, WAS TO MAKE PAYMENTS IN LIEU OF TAXES TO THOSE MUNICIPALITIES BURDENED WITH THE EXPENSE OF FURNISHING MUNICIPAL SERVICES TO GOVERNMENT-OWNED PLANTS, WHICH EXPENSE WAS BEING INEQUITABLY BORNE BY THE CITIZENS OF THE COMMUNITY. CONGRESS DID NOT INTEND TO MAKE A GIFT OR WINDFALL TO COMMUNITIES WHERE THE PROPERTY WAS NEVER ON THE TAX ROLLS OF THE CITY, NO FACILITIES FURNISHED AND NO BURDEN SUFFERED.

THE ANSWER TO THE QUESTION CONTAINED IN YOUR LETTER IS IN THE NEGATIVE.