IN THE MATTER OF LEMONT TOWNSHIP HIGH SCHOOL DISTRICT #210,
Docket No. 89-48-I
Impact Aid Proceeding
Appearances: Scott E. Nemanich, Esq. of Chicago, Illinois, for the Respondent
Mark W. Smith, Esq. of Washington, D.C., Office of the General Counsel, United States Department of Education for the Office of the Assistant Secretary for Elementary and Secondary Education
Before: Judge Allan C. Lewis
This is a proceeding instituted by Lemont Township High School
District #210 (Lemont) to receive Federal financial assistance
for the fiscal year 1988 under Section 2(a) of the Act of
September 30, 1950, Pub. L. 874, 64 Stat. 1100 (to be codified at
20 U.S.C. § 237(a)). Previously, its application for impact aid
was denied by the Assistant Secretary for Elementary and
Secondary Education of the United States Department of Education
(ED). ED determined that, as a result of the transfer of various
real properties by the U.S. Atomic Energy Commission to the
DuPage County Forest Preserve District in 1973, these properties
lost their classification as Federal property as defined by 34
C.F.R. § 222.3 (1988). As a result of excluding these properties
from the total amount of Federal property within Lemont's
district, Lemont did not have Federal property aggregating 10 per
cent or more of all real property within its district and,
therefore, was ineligible for impact aid under 20 U.S.C. §
Lemont advances two grounds for recovery. First, it asserts that
the definition of Federal property in 34 C.F.R. § 222.3 is
narrower than the statutory definition of Federal property in 20
U.S.C. § 244(1) and, therefore, the regulation is invalid.
Second, it asserts that, as a result of various deannexations of
non-Federal properties within its district, Lemont was a
successor local educational agency and, therefore, was entitled
to recompute its percentage of Federal property for purposes of
the 10 percent requirement of 20 U.S.C. § 237(a). The tribunal
holds that it does not have the authority to declare regulations
invalid, that Lemont was not a successor local educational
agency, and that, in any event, it may not recompute its
percentage of Federal property as of the deannexations of non-
Federal properties as a result thereof. Accordingly, the
determination by ED was correct and Lemont's appeal is dismissed
The pertinent facts are set forth in the opinion. The detailed
findings of fact are set forth in the appendix, infra.
In 1950, Congress enacted the Act of September 30, 1950 which
recognized the responsibility of the United States for the impact
of certain Federal activities on the local educational agencies
in the areas in which these activities were conducted. Act of
September 30, 1950, § 1 (20 U.S.C. § 236) (hereinafter Section
236). Congress declared that one aspect of the financial
assistance program, Section 2 assistance, was to provide aid--
for those local educational agencies upon which the United States has placed financial burdens by reason of the fact that--
(1) the revenues available to such agencies from local sources have been reduced as the result of the acquisition of real property by the United States;
Generally, in order for a local educational agency to receive
Section 2 impact aid, it is necessary that the United States owns
real property within the district and that this property, i.e.
the Federal property, aggregate 10 percent of the assessed value
of all real property within the district. Sections 237(a) and
The initial controversy is whether certain Federal property under
Section 244(1), which was subsequently transferred subject to
various restrictions and limitations by the Atomic Energy
Commission to DuPage County in 1973, continued thereafter to
constitute Federal property, and thereby, enabled Lemont to
exceed the minimum 10 percent Federal property requirement of
Section 237(a)(1) for the fiscal year 1988.
ED maintains that the 2,040 acres of Argonne Forest no longer
constitutes Federal property for purposes of Section 237(a), even
though it was transferred subject to certain limited
restrictions, limitations, etc. In ED's view, Federal property,
as defined by 34 C.F.R. § 222.3 (1988)(hereinafter Reg. § 222.3),
is "[r]eal property . . . [t]hat the United States owns in fee
simple." While the Federal government retained certain interests
by virtue of the restrictions, limitations, etc. in the deed of
transfer, ED asserts that these interests do not rise to the
level of a fee simple interest and, accordingly, this property
may not be included as Federal property in the calculation of the
10 percent Federal property requirement.
Lemont concedes that the interests retained by the United States
in the Argonne property do not constitute a fee simple interest
under Reg. § 222.3 and, therefore, absent the deannexations of
non-Federal property discussed below, it would not qualify under
the 10 percent of Federal property test of Section 237(a).
Lemont urges, however, that the definition of Federal property in Reg. § 222.3, which requires the United States to have a fee simple interest in the property, is narrower than the statutory definition of Federal property in Section 244(1). Section 244(1) defines Federal property as real property "owned by the United States" which, in Lemont's view, would include real property over which the United States retained significant dominion and control due to the limitations and restrictions imposed in its transfer such that it remained, effectively, the owner of the real property.See footnote 1 1/ Therefore, Lemont argues that the fee simple requirement of Reg. § 222.3 should be disregarded and, in so doing, urges that this tribunal declare the regulation invalid as it thwarts the statutory scheme.
Where a party challenges the validity of a regulation, it raises
two issues. The first issue is whether the tribunal has the
authority or power to rule on the validity of the regulation and,
if so, the second issue addressed by the tribunal is whether the
regulation is valid. This latter issue turns on whether the
regulation reflects a reasonable interpretation of the underlying
statute. Commissioner v. South Texas Lumber Co., 333 U.S. 496, 501 (1948).
A tribunal may possess the authority to pass upon the validity of
regulations by virtue of its inherent authority or a specific
statutory authority. Gibas v. Saginaw Min. Co., 748 F.2d 1112 (6th Cir. 1984); Panitz v. District
of Columbia, 112 F.2d 39 (D.C. Cir. 1940). The inherent authority to rule on the validity
of regulations extends to Article III courts. Article III courts are presided over by judges who
enjoy the benefit of life tenure
and a guarantee against salary diminution. Gibas, 748 F.2d at 1117. However, administrative
law judges are not appointed for
life and are not protected from salary diminution and, therefore,
do not possess this inherent authority. 5 C.F.R. §§ 351.202(a)
and 930.215; 5 U.S.C. § 5372 (1991).
In several instances, Congress created various courts and boards
through specific legislation with the authority to pass upon the
validity of regulations. Congress empowered "legislative courts"
under Article I, such as the United States Tax Court and the
United States Claims Court with such attendant authority. E.g. Brown-Forman Corp. v.
Commissioner, 94 T.C. 919, 947 (1990); Anchor Hocking Corp. v. United States, 11 Cl.Ct. 173
(1986); Dow Corning Corp. v. United States, 22 Cl.Ct. 184 (1990). This tribunal is not an
Article I court. In addition, Congress
created several boards or other tribunals with the specific
authority to pass upon this question. For example, the Tax Court
of the United States, the predecessor to the Article I United
States Tax Court, was an independent agency in the Executive
Branch of the Government (Burns, Stix Friedman & Co, v. Commissioner, 57 T.C. 392,
394-395 (1971)) which exercised this authority. E.g. Federal Union Insurance Co. v.
Commissioner, 5 T.C. 374 (1945). Similarly, the Benefits Review Board, a body
within the Department of Labor, was created by Congress in 1972
and was given this specific authority according to the Sixth
Circuit in Gibas, 748 F.2d 1112 (1984). Accord Carozza v. United States Steel Corp., 727 F.2d
74 (3d Cir. 1984).
In Gibas, the Sixth Circuit noted that the Board was created to fulfill the review function
previously performed by the district
courts regarding benefit requests under several federal workers'
compensation programs. Congress expressly granted the Board the
authority under 33 U.S.C. § 921(b)(3) "to hear and determine
appeals raising a substantial question of law or fact." The
Board could not engage in de novo review of an administrative law judge's determination and
could only set aside this determination
if it was not supported by substantial evidence or not in
accordance with the law. Decisions by the Board were appealable
to the courts of appeal. In these circumstances, the Sixth
Circuit concluded that--
[i]n sum, the Board performs the identical appellate
function previously performed by the district courts.
Therefore, it appears that Congress intended to vest in
the Board the same judicial power to rule on
substantive legal questions as was possessed by the
district courts. See Carozza v. United States Steel Corp., 727 F.2d 74 (3d Cir. 1984).
Id. at 1118. It held, therefore, that the specific statutory
authority conferred by Congress on the Board to decide appeals
raising "a substantial question of law" included the authority to
declare invalid regulations promulgated by the Secretary of
In the case at bar, it is apparent that Congress did not
specifically authorize the tribunal to pass on the validity of
regulations issued by the Secretary of Education. A local
educational agency which is adversely affected by any action of
the Secretary regarding impact aid under Section 2 is entitled to
a hearing in accordance with 20 U.S.C. § 240(g) which provides
[e]ach local educational agency which is adversely
affected or aggrieved by any action of the Secretary
under this subchapter shall be entitled to a hearing
on, and review of, such action in the same manner as if
such agency were a person under the provisions of
chapters 5 and 7 of Title 5.
The reference to Chapter 5 of Title 5 invokes the Administrative
Procedure Act, 5 U.S.C. § 551 et. seq., a statute of general application to agency
adjudications. Adjudications to be
determined on the record are conducted in accordance with 5
U.S.C. § 556 which delineates the parameters of the hearing.
Section 556(c) details the authority of the administrative law
judges in the adjudications and provides that initial decisions
by administrative law judges are made subject to the published
rules of the agency--
(c) Subject to published rules of the agency and
within its powers, employees presiding at hearings
. . .
(8) make or recommend decisions in accordance with section 557 of this title;
The term rules is further defined by 5 U.S.C. § 551(4) as "the
whole or a part of any agency statement of general or particular
applicability . . . designed to implement, interpret, or
prescribe law" and would, therefore, include regulations
promulgated by the Secretary of Education.See
Thus, the tribunal's initial decision is made subject to the published
rules of the Department of Education which require the tribunal
to apply the definition of Federal property as set forth in Reg.
§ 222.3. Hence, it is apparent that Congress did not
specifically authorize the tribunal to pass upon the validity of
regulations promulgated by the Secretary of Education. In fact,
Congress required that the administrative law judge should follow
the published rules of his or her agency.See footnote 3
Lemont notes that other parts of 34 C.F.R., for example Section
81.5(b), contain restrictions which specifically provide that an
administrative law judge is bound by all applicable statutes and
regulations and may not waive them or rule them invalid. Lemont
argues that the omission of such a restriction in 34 C.F.R. Part
218, coupled with the requirement under Reg. § 218.3 that the
applicant set forth the issues of law in its request for a
hearing, permits an administrative law judge to pass upon the
validity of a regulation in the impact aid context as this is a
question of law.
ED replies that these restrictions were added regulations
promulgated more recently to make explicit what the Department
considered implicit in the law through an abundance of caution.
The pertinent impact aid procedural regulations, as noted by ED,
were promulgated almost 40 years ago and before the more recent
practice was adopted.
As noted above, the initial decision by an administrative law
judge is made subject to the substantive regulations of the
agency. Thus, absent a clear mandate from Congress and
corresponding implementing regulations which authorize the
administrative law judge to pass upon the validity of
regulations--all of which are not present in this case--the
tribunal must follow the substantive regulations. Therefore,
Lemont's argument in this regard is rejected.
While the parties have not cited any judicial decisions on point, the dicta in several cases cited by ED support its position. For example, in Nash v. Bowen, 869 F.2d 675, 680 (1989), cert. denied 479 U.S. 985 (1989), the Second Circuit affirmed the district court's determination that the administrative law judge's decisional independence was not infringed upon by the "Peer Review Program" initiated by the Social Security Administration and wrote that--
[a]n ALJ is a creature of statute and, as such, is
subordinate to the Secretary in matters of policy and
interpretation of law. Mullen v. Bowen, 800 F.2d 535, 540-41 n. 5 (6th Cir.1986); Association
of ALJs, 594 F. Supp. at 1141.
Similarly, in Dixon v. Heckler, 589 F.Supp. 1494 (D.N.Y. 1984), various disability claimants
sought, inter alia, a preliminary injunction enjoining the usage of a regulation by the Secretary
of Health and Human Services in evaluating the severity of a
claimant's impairment on the ground that it conflicted with the
statute. In granting the injunction, the district court noted,
in passing, that "neither the ALJs nor the Appeals Council, of
course, have the authority to declare the Secretary's severity
standard unlawful, but instead are required to apply that
standard (along with SSR 82-55) to each of them." Id. at 1501.See footnote 4
The statutory scheme adopted by Congress to resolve disputes
regarding the eligibility of school districts for impact aid also
supports the above conclusion. In an impact aid proceeding, the
initial decision by the administrative law judge may, under Reg.
§ 218.8, be reviewed by the Secretary of Education--a position
clearly within the Executive Branch of the Government. Thus,
under the position advocated by Lemont, a determination regarding
the invalidity of a regulation by an administrative law judge
would occur within the process before the Executive Branch had
completed its consideration and, moreover, would permit the
Executive Branch to reverse such a determination which is
generally judicial in nature.See footnote 5
In contrast, the scheme employed by Congress with respect to the Benefits Review Board
and the Tax
Court of the United States required that their decisions, which
included determinations regarding the validity of regulations,
were appealable directly to the courts of appeals. Gibas, 748 F.2d at 1118; 26 U.S.C. §
7482(a)(1)(1967). Thus, Lemont's
theory advocates a statutory scheme which is incongruous with the
orderly resolution of administrative claims.
ED asserts that a ruling by the Department's Civil Rights
Reviewing Authority in an interlocutory appeal in In re Chatham County School District, 53
Education Law Reporter 1474 (1989), establishes precedent which "squarely
controls" the issue at bar.
There, the Reviewing Authority rejected a discovery request by
the school district designed to elicit information regarding the
Department's view as to whether the more recent enactment of
Public Law 94-142, the Education For All Handicapped Children Act
(20 U.S.C. § 1401), preempted or overlapped actions by the
Department under Section 504 of the Rehabilitation Act of 1973,
29 U.S.C. § 794. The Reviewing Authority addressed the matter as
The issues of jurisdictional preemption and the possible
overlapping of Section 504 and the EHA are purely issues of
law, for which the requested discovery is irrelevant. The
procedural regulations promulgated to accompany Section 504
clearly provide for and mandate that OCR must investigate
complaints. Respondents are asking the ALJ, and ultimately
this body, to declare those regulations preempted by the EHA
and therefore invalid. Neither the ALJ nor the Reviewing
Authority has that power [in light of Oestereich v. Selective Service Board, 393 U.S. 233
Id. at 1476. The above ruling is a view expressed by another
body within the Department regarding its authority. In addition,
the Reviewing Authority viewed the issue essentially as a
challenge to the validity of its jurisdiction under Section 504,
a question which is significantly different from the existence of
specific authority to pass upon the validity of a substantive
program-type regulation. Thus, it has only marginal relevance in
Based on the above, it is concluded that this tribunal does not
have the authority to pass upon the validity of a regulation
promulgated by the Secretary. Accordingly, it is inappropriate
to rule upon the validity of Reg. § 222.3 in this decision.
Even if the 2,040 acres of the Argonne property do not constitute
Federal property after their transfer to DuPage County in 1973,
Lemont asserts that it, nevertheless, qualifies under the 10
percent test of Section 237(a) as a result of four deannexations
of non-Federal property which occurred between 1952 and 1983.See footnote 6
According to Lemont, these deannexations represent a 19% loss in
the total assessed valuation of real property within its district
and, therefore, its remaining Federal property constitutes more
than 10 percent of its total assessed value of real property as
In Lemont's view, each deannexation of non-Federal property
causes the school district to acquire a status as a "successor"
local educational agency under Reg. § 222.20 and, more
particularly, Reg. § 222.20(d)(2).See footnote 7
As a result thereof, it is appropriate to recompute its percentage of Federal property based
upon the assessed values of the real properties within its
district as of the year of the deannexation.See footnote
ED disagrees that the deannexation of non-Federal property
results in Lemont acquiring the status as a "successor" local
educational agency and asserts that a "successor" local
educational agency is created only under circumstances in which a
new legal entity is formed. Even if Lemont were a "successor"
local educational agency, ED argues that there is no authority in
the governing statute or regulations which permits Lemont to
recalculate its percentage of Federal property by virtue of a
deannexation of non-Federal property. ED also asserts that there
is no authority which permits a recomputation in the manner urged
Lemont asserts that, following a deannexation, it became a
successor local educational agency under Reg. § 222.20, and more
particularity, subsection (d)(2). This regulation provides--
(a) Any applicant that is a party to an annexation,
consolidation, deconsolidation, merger, or other similar
action affecting the boundaries, classification, control,
governing authority, or identity must provide to the
Secretary as soon as practicable:
(1) A description of the character and extent of the change;
(2) The effective date of the change;
(3) Full identification of all predecessor and successor local educational agencies (LEAs);
(4) Full information regarding the disposition of the assets and liabilities of all predecessor LEAs;
(5) Identification of the governing body of all successor LEAs; and
(6) The name and address of each authorized representative officially designated by the governing body of each successor LEA for purposes of Pub.L. 81-874.
(b) If a payment is made under sections 2, 3, or 4 of the Act (hereinafter "sections 2, 3, or 4") to an LEA that, because of a change in boundaries or organization, has ceased to be a legally constituted entity during the regular school term, the LEA may retain that payment if:
(1) An adjustment is made in the entitlement of a successor LEA to account for the payment; or
(2)(i) The payment does not exceed the amount the former LEA would have been entitled to receive if the change in boundaries or organization had not taken place; and
(ii) A successor LEA is not an eligible applicant.
(c) Any portion of a payment made under sections 2, 3, or 4 to a former LEA that exceeds the amount allowed by paragraph (b)(2)(i) of this section must be returned to the Secretary.
(d)(1) Except as provided in § 222.21(d), a successor LEA that is eligible for section 3 or 4 assistance may elect to have the Secretary determine its section 3 or 4 entitlement for the entire fiscal year upon either of the following bases:
(i) The entire area within its jurisdiction on the last day of that fiscal year;
(ii) The area within its jurisdiction of one or more of the former LEAs that would have been entitled to receive payment under section 3 or 4 if the change in boundaries or organization had not occurred.
(2) A successor LEA's section 2 eligibility and entitlement are determined in accordance with § 222.102.
The above regulation offers no support for Lemont's view that a
deannexation creates or causes the affected local educational
agency to become a successor local educational agency. The
nature of the regulation reflects that it was promulgated
primarily to provide guidance for local educational agencies
which, while receiving impact aid payments, were involved in a
change in boundaries or organization.See footnote 9
Thus, under this
perspective, it has no application in Lemont's case.
In addition, paragraph (a) of Reg. § 222.20 requires each local
educational agency to provide various information in the event of
a change in boundaries or the organization. Within this
paragraph, the term successor local educational agency refers to
an entity which is in existence after a transaction, such as a
merger or consolidation, in which at least one existing local
educational agency ceases to be a legally constituted entity.
Thus, for example, the applicant is required under Reg. §
222.20(a)(3) and (4) to identify "all predecessor and successor
local educational agencies" and to provide information regarding
"the disposition of the assets and liabilities of all predecessor
Paragraphs (b) and (c) address the circumstance under which a
local educational agency is entitled to retain the impact aid
payment for the year in which there was a cessation of a legally
constituted local educational agency due to a change in the
boundaries or organization. Subparagraph (d)(1) addresses a
permissible variant in the entitlement to section 3 or 4 aid for
a successor local educational agency in which at least one former
local educational agency ceased to be legally constituted.
Paragraph (d)(2) directs the successor local educational agency
to Reg. § 222.102 to determine its section 2 eligibility on the
basis of the former school districts or the newly consolidated
district. Reg. § 222.102(a) specifically applies only to a local
educational agency formed by the consolidation of "two or more
former school districts." Hence, the term successor local
educational agency as employed in paragraph (d)(2) does not
include a local educational agency which has undergone a
deannexation. Accordingly, Lemont's argument that it is a
successor local educational agency under Reg. § 222.20 is not
supported by the regulation and, therefore, is rejected.
Even if a deannexation causes Lemont to be a successor local
educational agency under Reg. § 222.20(d)(2), ED maintains there
is no authority in the statute or the regulations which allows
Lemont to recompute, in the year of deannexation, its percentage
of Federal property as the result of the deannexation. The
For a given year, the percentage of Federal property of a local
educational agency remains unaffected unless there is an
acquisition of Federal property by the United States. Section
237(a); Reg. § 222.94(a). A disposition of Federal property
during the current year will affect the percentage of Federal
property as of the following year. Section 244(1)See
; Reg. § 222.94(b). The increase in the percentage of Federal property
due to the acquisition of Federal property is the amount that the
current assessed value of this Federal property bears to the
current assessed value of all real property (including the
particular Federal property in question) within the school
district. Section 237(a); Reg. § 222.94(a). In a similar
fashion, the disposition of Federal property by the United States
causes a decrease in the percentage of Federal property by the
exact amount by which the percentage of Federal property was
increased as a result of its acquisition. Reg. § 222.94(b); cf. H. Rep. No. 2287, 81st
Cong., 2d Sess. at 27. Thus, the
percentage of Federal property represents a composite of the
various Federal properties within the school district and is not
recalculated upon the deannexation of non-Federal property.
Lemont notes that, in ED's computation of Lemont's percentage of
Federal property for 1988, ED excluded 3 parcels of Federal
property which had been within the boundaries of the school
district until these parcels were deannexed as part of the 1983
deannexation. Lemont questions the basis for excluding these
Federal properties in determining the percentage of Federal
property for 1988 when the four prior deannexations of non-
Federal property did not have a similar effect.
The eligibility for impact aid is an annual determination and
based upon the presence within the school district of sufficient
Federal property to meet or exceed the requisite 10 percent
requirement. The presence of Federal property is an implicit
requirement of the statutory scheme and a prerequisite to satisfy
the purpose of the impact aid legislation, namely to compensate a
school district annually for the removal of real property from
its tax rolls by the United States. Where this Federal property
has been removed from the school district by deannexation, the
legislative purpose is no longer served by the inclusion of this
property within the school district's percentage of Federal
property. Accordingly, it was proper for ED to exclude these 3
parcels. In any event, the treatment accorded these 3 parcels is
not significant since Lemont conceded that the inclusion or
exclusion of these properties in the percentage of Federal
property would have no effect on its eligibility for impact aid.
In addition, the entire percentage of Federal property for a
school district is not recalculated upon the divestment of a
Federal property. The percentage of Federal property is adjusted
only to reflect the effect of the particular Federal property
divested. Congress selected the time of acquisition as the
appropriate time to measure the impact of Federal ownership upon
the district and, accordingly, the remaining Federal property
continues to be reflected in the percentage of Federal property
based upon the amount by which each parcel increased the
percentage of Federal property in the year of its acquisition.
Reg. § 222.94(b). Thus, it is inconsistent with the statute and
the regulations to redetermine, as Lemont urges, its over-all
percentage of Federal property as a result of the divestment of
one or more Federal properties by using the current assessed
values for each of the remaining Federal properties and the
current assessed values of all real property in the school
district.See footnote 11
Lemont argues that ED abused its discretion because it failed to
promulgate a regulation that permits a redetermination of the
percentage of Federal property where a deannexation of non-
Federal property occurs while, at the same time, it promulgated
Reg. §§ 222.20(d)(2) and 222.102, regulations which govern the
consolidation of school districts. Consolidations and
deannexations are significantly different events for purposes of
impact aid. A consolidation eliminates at least one of the legal
entities involved while a deannexation of non-Federal property
affects only the size of the legal entity and, thus, has no
effect on the legal status of the school district. Congress
crafted a special approach for the consolidated situation to
ensure that consolidations were not discouraged. H.R. Rep. No.
2287 at 10. Thus, Section 237(c) provided that the successor
local educational agency could determine its section 2
eligibility either on the basis of its former LEAs or on the
basis of the new, consolidated local educational agency. Section
237(c); Reg. § 222.102.
In the context of a deannexation or annexation of non-Federal
property, the legal entity is unaffected and, therefore, it was
not necessary to provide an alternative basis for determining the
eligibility of the local educational agency. Moreover, the
percentage of Federal property is also unaffected under the
method chosen by Congress. Therefore, in these circumstances, it
was proper for the Secretary to promulgate specific regulations
governing consolidations while he left the general eligibility
regulations under Reg. § 222.93 to govern deannexations and
annexations of non-Federal property.
Lastly, ED asserts that Lemont failed to provide reliable data
that could be used under its theory addressing deannexations to
determine whether it satisfied the 10 percent test of Section
237(a). For example, ED suggests that Lemont did not obtain the
official assessed values of the parcels which comprised the
deannexed land. ED also requests that if the tribunal finds that
the Assistant Secretary erred by failing to "consider" the
deannexations in determining Lemont's percentage of Federal
property for 1988, the matter should be remanded to the
Department for further development due to the inadequacy of the
factual record on this issue. Lemont replies that it considers
ED's argument to be in "bad faith and in violations of the
The parties executed a stipulation in this case, and paragraph 42 thereof specifically addresses this matter--
The parties agree that if the land conveyed to the DuPage
County Forest Preserve District is not Federal property
within the meaning of section 403(l) of P.L. 81-874, 20
U.S.C. § 244(l), the School District is not eligible under
section 2(a)(1) for FY 1988 unless the Department erred in
failing to consider, in determining Lemont's section 2
eligibility, the deannexations described below that resulted
in loss of property and changes in the School District's
The stipulation is clear and its import is equally evident, that
is, if Lemont's alternative position--that the deannexations
should be considered in ascertaining its percentage of Federal
property for 1988--is adopted, then ED agrees that Lemont is
eligible for impact aid for 1988. Thus, ED's argument is
irrelevant in light of the stipulation and contrary to its
expressed agreement, and will not be addressed herein.
In view of the above, it is concluded that Lemont may not
recalculate, for the fiscal year 1988, its percentage of Federal
property for purposes of the 10 percent test under Section 237(a)
by virtue of the four deannexations of non-Federal property which
occurred between 1952 and 1983. Its percentage of Federal
property for the fiscal year 1988 was, as determined by ED, 5.4
percent. Accordingly, it is not eligible for impact aid under
On the basis of the foregoing findings of fact and conclusions of
law, and the proceedings herein, it is hereby ORDERED that
Lemont's appeal is dismissed with prejudice.
Allan C. Lewis
Administrative Law Judge
Issued: February 6, 1992
1. Lemont Township High School District No. 210 is a legally
constituted school district, located within the State of
Illinois, that seeks financial assistance under section 2
("section 2") of P.L. 81-874 (20 U.S.C. 237) for Federal fiscal
year (FY) 1988 (school year 1987-88). No other fiscal years are
at issue in this proceeding.See footnote 12
2. The School District is a local educational agency ("LEA")
within the meaning of P.L. 81-874, commonly known as the Impact
Aid law, as that term is defined in section 403(6) of that law
(20 U.S.C. 244(6)).
3. Lemont Township High School District No. 210 ("Lemont") is
located in Lemont Township and Downers Grove Township in Cook and
DuPage Counties, Illinois, respectively.
4. Argonne National Laboratory, formerly an installation of the
Atomic Energy Commission, is an installation of the U.S.
Department of Energy. It is located entirely within Lemont
Township High School District No. 210 in the portion of the
School District in Downers Grove Township, DuPage County,
5. In 1947, the United States first acquired ownership of real
property within the Lemont Township High School District No. 210
for the purpose of constructing and maintaining the Argonne
National Laboratory. The United States acquired fee simple title
to approximately 3,700 acres of predominantly farm land over a
two year period, 1947 and 1948.
6. The Forest Preserve District of DuPage County, Illinois
("DuPage County Forest Preserve District"), a unit of local
government, was organized in 1915, under Chapter 57 1/2 of the
Illinois Revised Statutes in order to "acquire and hold lands
containing natural forests . . . for the purpose of the
education, pleasure and recreation of the public."
7. On February 12, 1970, the President issued Executive Order 11505 (35 Fed. Reg. 2855) establishing a procedure for identifying unneeded Federal real property and providing the President with recommendations as to the disposition of that property. The Executive Order required agency heads to survey all real property under their control and report to the Administrator of General Services all properties not utilized or underutilized.
8. As a result of the review required by Executive Order 11505,
on April 13, 1971, the Manager of Argonne National Laboratory
transmitted a Report of Excess Real Property (Standard Form 118)
to the Regional Administrator of the General Services
Administration declaring an estimated 2,040 acres of Federal
property on the perimeter of the Argonne National Laboratory to
9. On May 11, 1971, the DuPage County Forest Preserve District
enacted an ordinance authorizing the filing of an application on
its behalf for the transfer to it of the excess Argonne National
Laboratory property "subject to such exceptions, reservations,
terms, covenants, agreements, conditions, and restrictions as the
Secretary of the Interior, or his authorized representative may
require . . . ." Pursuant to the ordinance, some time later an
application was filed on behalf of the DuPage County Forest
Preserve District with the Bureau of Outdoor Recreation, U.S.
Department of Interior.
10. By quitclaim deed dated June 15, 1973, the United States,
acting by and through the Regional Director of the Bureau of
Outdoor Recreation, under authority of section 203(k)(2) of the
Federal Property and Administrative Service Act of 1949 (40
U.S.C. 484(k)(2)), conveyed to the DuPage County Forest Preserve
District all of its right title and interest, subject to certain
easements, reservations, exceptions and restrictions stated in
the deed, in the excess Argonne National Laboratory land "for and
in consideration of the use and maintenance of the property . . .
for public park or public recreation purposes . . . ." Easements
and rights-of-ways were retained for utilities and pipelines,
railroad tracts, and certain roads. The Forest District and its
assignees were subject to various restrictions including that--
1. No buildings may be erected or occupied as a permanent or
temporary residence except that quarters may be provided for
employees of the Forest District at sites approved by the Atomic
2. No changes in the contour of the land were permitted without prior written approval by the Atomic Energy Commission; and
3. The Atomic Energy Commission reserved the right to enter and sample the land, water and air and to maintain continuous monitoring stations.
In addition, the property may not be sold, leased or otherwise
disposed of except to another eligible government agency without
the approval of the Secretary of Interior and, in any event, may
only continue to be used for a public park or public recreational
purposes. Recreational facilities and related services may be
provided by the Forest District through concession agreements
with third parties provided prior concurrence to such agreements
is obtained in writing from the Secretary of the Interior.
Lastly, the property may revert to the United States in the event
the United States determines that the premises are needed for
After this conveyance, the DuPage County Forest Preserve District
added the land conveyed by the quitclaim deed to the Waterfall
Glen Forest Preserve subject to the various reservations,
exceptions, and restrictions as stated in the deed.
11. Prior to the transmittal of the Report of Excess Real
Property referred to in ¶ 8, the agencies involved in the
conveyance of the excess Argonne National Laboratory property,
including the DuPage County Forest Preserve District, met to
discuss, among other things, the conditions and restrictions that
were ultimately included in the quitclaim deed.
12. The Atomic Energy Commission and its successor, the U.S.
Department of Energy, have annually made a payment in lieu of
taxes (PILOT) to DuPage County for the Argonne National
Laboratory land under section 168 of the Atomic Energy Act of
1954 (42 U.S.C. 2208). In FY 1988 the U.S. Department of Energy
made a PILOT payment in the amount of $30,281.24. Each year
DuPage County reallocated the PILOT payments among the units of
local government within its jurisdiction including Lemont
Township High School District No. 210. Lemont's share of the
payment was calculated by the County by multiplying the School
District's then current tax rate by the 1946 assessed value of
the property within the School District held by Argonne National
Laboratory. In the years 1981 - 1988 the School District
received the following amounts from the PILOT payment:
1981 $ 9,694.03
1982 $ 6,671.84
1983 $ 9,399.24
1984 $ 8,743.03
1985 $ 9,586.66
1986 $ 9,586.66
1987 $ 9,516.68
1988 $ 9,586.66
Similar payments have been made to two elementary school
districts, Cass School District No. 63 and Palisades School
District No. 180, that have Argonne National Laboratory land
within their boundaries and that have been found by the
Department to be eligible to receive Section 2 assistance. The
Department has never considered such payments - nor has any
authority to - with regard to qualifying under the 10% criterion
under section 2(a)(1)(20 U.S.C. 237(a)(1)).
13. Both parties agree that Section 2 of P.L. 81-874 (20 U.S.C.
237(a)) is the relevant statutory provision. The U.S. Department
of Education ("Department") re-examines whether an applicant
satisfies the eligibility criteria in that provision on an annual
14. The Department determines whether a section 2 applicant
meets the 10% criterion under section 2(a)(1) by:
(1) calculating, for each year in which the Federal Government has acquired and still owns in fee simple ownership of taxed real property within the school district, the percentage that the assessed value of the acquired taxed real property is, at the time of acquisition, of the total assessed value for all taxed real property in the school district (including the acquired property) at that same time; and 2) totaling the percentages computed in step number (1) to obtain the aggregate percentage of assessed value, as of the time(s) of acquisition of real property within the school district acquired by the Federal Government. If this aggregate percentage of assessed value is ten percent or more, the Department determines that the applicant meets the 10% eligibility criterion under section 2(a)(1). If this aggregate percentage of assessed value is less than ten percent, the Department determines that the applicant does not meet the 10% eligibility criterion under section 2(a)(1).
15. Where there has been a reduction in the Federal property
within a school district (for example due to the divestiture of
Federal property) the Department redetermines the LEA's
eligibility under section 2(a)(1) by recalculating, for each year
for which there was a reduction, the total assessed value at the
time of acquisition of the Federal property remaining within the
LEA. For each of those years, the Department then recalculates
the percentage that the assessed value of the remaining acquired
Federal property is, at the time of acquisition, to the total
assessed value for all taxed real property in the school district
(including the acquired property) at that same time. The
percentages for each year in which the Federal Government
acquired and still owns eligible Federal property (if more than
one year) are then totalled to obtain the aggregate assessed
value of the remaining Federal property. If this aggregate
percentage of assessed value is ten percent or more, the
Department determines that the applicant meets the 10%
eligibility criterion under section 2(a)(1). If this aggregate
percentage of assessed value is less than ten percent, the
Department determines that the applicant does not meet the 10%
eligibility criterion under section 2(a)(1).
16. Lemont first received financial assistance under the Impact
Aid law beginning with FY 1969 and has received financial
assistance under section 3 of P.L. 81-874 (20 U.S.C. 238), which
has a different payment basis and different eligibility criteria
than section 2. The School District has received a total of
$ 173,070.50 in section 3 assistance since FY 1969. The Department has no authority to consider section 3 assistance with regard to qualifying under the 10% criterion under section 2(a)(1)(20 U.S.C. 237(a)).
17. In 1966, Lemont contacted Mr. Gordon Aaland of the then
Office of Education in regards to filing for Section 2
assistance. For some reason, Lemont felt and/or was led to
believe that it did not meet the 10% criteria and did not apply.
No one has been located who is able to testify as to the role, if
any, that Mr. Aaland played in this decision.
18. The first year for which the School District applied to the
Department for assistance under section 2 was Federal FY 1982
(corresponding to school year 1981-1982).
19. By letter dated April 6, 1982, Lemont Superintendent Donald
E. Weber sent the Department certain documentation in support of
its FY 1982 application for section 2 assistance. The School
District's documentation with regard to the 10% criterion under
section 2(a)(1) consisted in part of a certified document dated
March 31, 1982 by the Downers Grove Township Assessor purporting
to list tracts acquired by the Atomic Energy Commission in 1946,
and the acreage and 1946 assessed value figure for those tracts.
An asterisk beside five of the listed tracts indicates that the
assessed valuation for those tracts was "extrapolated from
adjacent land" by some unspecified method. The total acreage
listed by the assessor was 3,733.94 acres, the approximate amount
of land originally acquired for Argonne National Laboratory
before the 1973 divestiture, with a listed total assessed
valuation of $950,772. The School District also submitted a
March 24, 1982 statement by the County Clerk of DuPage County
stating that the 1946 total assessed value for all taxed real
property in the School District within DuPage County was
$2,797,190 ($2,303,518 in "lands" and $494,672 in "lots"). A
similar statement by the County Clerk of Cook County, also dated
March 24, 1982, listed the total assessed value for all taxed
real property in the School District within that county to be
$4,900,076. Based on figures contained in these documents, the
School District submitted that it met the 10% criterion under
section 2(a)(1) since the 1946 assessed value of the 3,733.94
acres, $950,772 was, by its calculation, 12.35% of the total
assessed value for all taxed real property in the School District
as certified by the county clerks, $7,697,266 ($2,797,190 plus
$4,900,0760). The School District submitted each of its
subsequent applications for section 2 assistance, including FY
1988, based upon these figures.
20. In January, 1983, Department Program Officer James H. Link
notified Superintendent Weber by letter that in order to evaluate
the School District's eligibility for section 2 assistance, the
Department needed to be advised whether the property claimed by
the School District with regard to its FY 1982 section 2
application was presently owned by the Federal Government.
Superintendent Weber replied on January 19, 1983, stating that
3734.569 acres were acquired by the Federal Government in 1946,
and that 2292.229 had been conveyed to the DuPage County Forest
Preserve District in 1973, leaving 1442.34 acres of Argonne
National Laboratory Property in Lemont Township High School
District No. 210.
21. On January 31, 1983 the School District applied for section
2 assistance for FY 1983 (corresponding to school year 1982-
22. On February 8, 1983, William J. Phillips, Acting Director of
the Division of Impact Aid, now the Impact Aid Program, notified
Lemont Superintendent Donald E. Weber of the School District's
ineligibility for section 2 assistance for FYs 1982 and 1983. He
indicated a willingness to reconsider if the School District were
to identify the parcels retained by the Argonne National
Laboratory within 30 days and to review any correspondence Lemont
had with the Division of Impact Aid in the 1960s relative to
23. On February 9, 1983, Superintendent Weber wrote to Mr.
Phillips enclosing an affidavit recounting certain events in the
1965-1966 school year.
24. On October 19, 1983, Assistant Secretary Lawrence F.
Davenport notified Superintendent Weber of the School District's
ineligibility for section 2 assistance for FYs 1982 and 1983 due
to its failure to meet the 10% eligibility criterion under
section 2(a)(1) of P.L. 81-874, 20 U.S.C. 237(a)(1).
25. On January 4, 1984, Superintendent Weber requested the
Department to reconsider its determination with regard to FYs
1982 and 1983.
26. Following its FY 1983 application for assistance under
section 2, the School District filed applications for assistance
under section 2 for FYs 1984 - 1988, excluding FY 1986, on the
1984 January 31, 1984
FY 1985 February 28, 1985
FY 1987 January 31, 1987
FY 1988 January 31, 1988
27. On June 1, 1984, Assistant Secretary Lawrence F. Davenport
notified Superintendent Donald E. Weber of the School District of
its ineligibility for section 2 assistance for FYs 1982, 1983,
and 1984 because the property presently owned by the Federal
Government within the School District did not meet the 10%
eligibility criterion under section 2(a)(1) of P.L. 81-874, 20
28. On July 27, 1988, Dr. Charles E. Hansen, Acting Director of
the Division of Impact Aid, notified Lemont Superintendent John
F. Murphy of the School District's ineligibility for section 2
assistance for FYs 1984, 1985, 1987 and 1988 because of its
failure to meet the 10% eligibility criterion under section
2(a)(1) of P.L. 81-874, 20 U.S.C. 237(a)(1).
29. On September 21, 1988, the Department erroneously sent the
School District a payment of $11,972.59 in section 2 assistance.
The School District was advised of this error by a notice of
overpayment in the form of a voucher.
30. A series of meetings between representatives of the School
District and officials of the Department during the Spring and
early Summer of 1989 led to a reconsideration by the Department
of its previous determination under P.L. 81-874 that the School
District was ineligible for section 2 assistance. This
reconsideration of the School District's eligibility included
field investigations by a Department program officer, Dr. Sol
Spencer-Spears, and the careful review by the Department of the
facts ascertained in that investigation and of the legal
arguments asserted by counsel for the School District in a letter
dated June 30, 1989.
31. While the reconsideration was in progress, the School
District preserved its appeal rights regarding FY 1988 by filing
a notice of appeal dated June 18, 1989.
32. Dr. Spencer-Spears recalculated the School District's
eligibility as described in ¶ 15. Dr. Spencer-Spears obtained
records from the Argonne National Laboratory demonstrating the
date that title passed to the United States by deed or by
declaration of taking for each of the 147 parcels acquired by the
Federal Government. Title passed to the United States for all
the parcels in either 1947 or 1948. Working in the Office of the
County Clerk of DuPage County, Dr. Spencer-Spears examined the
official land and lot books for the land in question for 1947 and
1948, the years of acquisition. He ascertained that, with the
exception of one parcel, each of the 147 parcels was last
reflected as having an assessed value for tax purposes in 1947
and that, commencing with 1948, with the exception of the one
parcel, they were reflected on the tax records as tax-exempt
Federal property with no assessed value. Thus, for all of the
property except for one parcel, the 1947 assessed value was the
last assessed value at the time of Federal acquisition, whether
that acquisition occurred in 1947 or 1948. The one exception,
Federal Tract 21, was acquired in 1948 and had a 1948 assessed
value on the tax books at the time of acquisition. Federal Tract
21 was conveyed to the DuPage County Forest Preserve District in
1973 and therefore was not included in the post-divestiture
33. Dr. Spencer-Spears used a list of tracts provided to him by
Lemont to identify the parcels in the School District retained by
the Federal Government after the 1973 conveyance to the DuPage
County Forest Preserve District. In reviewing this list, he
noted that there were three parcels acquired by the Federal
Government (Federal Tracts 110, 111 and 112) that were not listed
as being within the School District. He verified that these
parcels, though part of the school district in 1947-48, were now
beyond the boundaries of the School District by comparing the
County Clerk's official map of the School District and the U.S.
Army Corps of Engineers map. Both maps show the dividing line
between Sections 10 and 11 and thus provide a point of reference
permitting confirmation that the three parcels lie outside of the
School District. Accordingly, Dr. Spencer-Spears excluded these
three parcels from his calculations.
34. For those eligible parcels on the list and wholly retained by the Federal Government in 1973, Dr. Spencer-Spears totalled their official 1947 assessed values obtained from the tax books. A number of the parcels were only partially retained by the Federal Government in 1973. For these parcels, Dr. Spencer- Spears used a proportion to calculate the 1947 assessed value of the retained portions of these parcels. The School District's list had the 1946 assessed value of the land originally acquired and the 1946 assessed value of the land retained. For each parcel, Dr. Spencer-Spears calculated the percentage that the 1946 assessed value of the retained acreage was of the 1946 assessed value of the land originally acquired. In order to calculate the 1947 assessed value of the portions retained, for each parcel he multiplied the percentage calculated for that parcel in the previous step by the 1947 assessed value for the parcel reflected in the tax books. The assessed values so derived for those parcels were added to the total for the undivided parcels. Dr. Spencer-Spears then divided the total assessed value of all real property figure obtained from tax assessor certifications by the total assessed value of the eligible Federal property retained after the conveyance to the Forest Preserve District to obtain the percentage of assessed value of property owned by the Federal Government in 1988.
The results of these calculations are as follows:
POST-DIVESTITURE: Assessed Value of Federal property as a
percentage of total assessed value of real
property, by year of acquisition
Total. Assess. Assess. Val. All %
Fed. Prop. Real Prop.
1947 $458,023 $8,372,391 5.4%
Percentage Acquired 5.4%
35. On August 16, 1989, Acting Assistant Secretary Daniel F.
Bonner notified Superintendent Murphy of the Department's
determination, following reconsideration, of the School
District's ineligibility for section 2 assistance because the
property presently owned by the Federal Government within the
School District did not meet the 10% eligibility criterion under
section 2(a)(1) of P.L. 81-874, 20 U.S.C. 237(a)(1).
36. On August 28, 1989, the School District supplemented its
hearing request for FY 1988 in writing.
37. The School District, while stipulating that the assessed
valuation of all real property in the district in the year 1947
was $8,372,391, asserts that the assessed valuation in the years
of acquisition of all the federal property originally acquired
for Argonne National Laboratory, which totalled $907,633, should
be included and that the portion allegedly divested in 1973 was
not truly divested from the Federal government and should be
included in calculating the eligibility of the District for
Section 2 assistance.
38. The parties agree that if the land conveyed to the DuPage
County Forest Preserve District is Federal property within the
meaning of section 403(l) of P.L. 81-874, 20 U.S.C. § 244(l), the
School District is eligible under section 2(a)(1).
39. The parties agree that if the land conveyed to the DuPage
County Forest Preserve District is not Federal property within
the meaning of section 403(l) of P.L. 81-874, 20 U.S.C. § 244(l),
the School District is not eligible under section 2(a)(1) for FY
1988 unless the Department erred in failing to consider, in
determining Lemont's section 2 eligibility, the deannexations
described below that resulted in loss of property and changes in
the School District's boundaries.
40. Since 1947, a total of four major deannexations have
occurred in 1952, 1960, 1965 and 1983. The deannexations in
total have resulted in a reductions of the boundaries of Lemont
Township High School District No. 210 by approximately 13.5% in area. There have been no
annexations or consolidations to the
school district since 1947.
41. It is the position of Lemont Township High School District
No. 210 that the deannexations should be considered in the
determination of the district's eligibility pursuant to Reg. §
222.20 which states that a party to an annexation, consolidation,
deconsolidation, merger or other similar action affecting its
boundaries must provide the Secretary of Education with a
description of the change and the date of said change as soon as
possible. The school district asserts that Reg. § 222.20 further
states that an LEA's payments will be adjusted based on the
changes of boundary or change in the legally constituted entity.
The Department asserts that the school district's interpretation
of the regulation is contrary to the express language of section
2(a)(1) of P.L. 81-874 which makes the assessed value of all real
property in the school district at the time(s) of acquisition the
benchmark for eligibility.
42. The Department has made no determination regarding the
eligibility of Lemont Township High School District No. 210 under
section 2(a)(2) or section 2(a)(3) of P.L. 81-874. The School
District's eligibility under these provisions is beyond the scope
of this proceeding and is not addressed by these stipulations of
43. As indicated below, following each deannexation, there was a
loss to the district of the following percentages when calculated
by the method described below.
Each of the above percentages was calculated by subtracting from
the DuPage County assessed valuation (where all of the
deannexations occurred) for the year prior to the deannexation
the assessed valuation of the DuPage County portion of the school
district for the year of the deannexation. That figure was then
divided by the assessed valuation of the entire school district
for the year prior to the deannexation to arrive at the
percentage of loss.
44. Lemont's percentage of Federal property for 1988 under the theory advocated by the Department was 5.4%.
A copy of the attached initial decision was sent by certified
mail, return receipt requested, on February 6, 1992, to the
Mark W. Smith, Esq.
Office of the General Counsel
U.S. Department of Education
Room 4091, FOB-6
400 Maryland Avenue, S.W.
Washington, D.C. 20202
Scott E. Nemanich, Esq.
Brydges, Riseborough, Morris
Franke and Miller
150 North Michigan Avenue
Chicago, Illinois 60601
A copy of the attached initial decision was also sent on February
6, 1992, to--
The Honorable Lamar Alexander
Secretary of Education
U.S. Department of Education
400 Maryland Avenue, S.W.
Washington, D.C. 20202-0100
taxation is not so much concerned with the refinement
of title as it is with actual command over the property
281 U.S. at 378.