IN THE MATTER OF Fairbanks North Borough School District,
Docket No. 91-21-I
Impact Aid Proceeding
Appearances: James D. DeWitt, Esq. of Guess & Rudd,
Haverstock Whitney, Esq. of the Office of the General Counsel, United States Department of Education for the Assistant Secretary for Elementary and Secondary Education, Washington, D.C.
Before: Judge Allan C. Lewis
This is a proceeding instituted by the Fairbanks North Star
Borough School District (Fairbanks) pursuant to 20 U.S.C. §
240(g) (1989) with respect to the Federal fiscal year 1990.
Fairbanks seeks to set aside the administrative determination of
the Assistant Secretary for Elementary and Secondary Education of
the U.S. Department of Education (ED) that the school district
qualifies for Federal Impact aid benefits under 20 U.S.C. §
238(b) for the children residing at Walden Estates, an off-base
military housing complex, rather than a higher rate afforded by
20 U.S.C. § 238(a). In its determination, ED concluded that
Walden Estates which is owned by the Dura Corporation and leased
to the United States did not qualify as Federal property under 20
U.S.C. § 244(1) and, therefore, Fairbanks was not entitled to
benefits under 20 U.S.C. § 238(a). In its appeal, Fairbanks
argues that the fee simple interest held by the Dura Corporation
represents an "other arrangement" under 20 U.S.C. § 244(1) and,
therefore, this property qualifies as Federal property. For the
reasons stated below, the tribunal holds that the Dura
Corporation's fee simple interest is not an interest held under
an "other arrangement" within 20 U.S.C. § 244(1). Therefore,
Fairbanks is not entitled to Federal impact aid benefits under
the higher rate afforded by 20 U.S.C. § 238(a).
The pertinent facts are set forth in the opinion. The detailed
findings of fact are set forth in the appendix, infra.
In 1950, Congress 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. 20 U.S.C. § 236 (1989)(hereinafter Section 236). The
activities of the United States placed financial burdens on the
local educational agencies 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; or
(2) such agencies provide education for children residing on Federal property; or
(3) such agencies provide education for children whose parents are employed on Federal property; or
(4) there has been a sudden and substantial increase in school attendance as the result of Federal activities.
Thus, Congress concluded--
the school district is faced not only with a loss of taxable
property--sometimes very valuable property--but also with
providing schooling for residents of that nontaxable Federal
reservation as well as for an increased number of children
living outside the Federal reservation.
H.R. Rep. No. 2287, 81st Cong., 2d Sess. at 4 (1950).
As a result thereof, Congress fashioned three financial aid
packages for the affected local educational agencies to alleviate
these concerns: Section 237 which deals with Federal
acquisitions, Section 238 which governs educating children
residing on Federal property or whose parents are employed on
Federal property, and Section 239 which addresses sudden
increases in school attendance due to Federal activities in the
The instant case concerns Section 238 which--
covers the situation in which the Federal Government, by
owning tax-exempt property on which children reside or on
which their parents are employed, has in effect imposed upon
the school district the financial burden of educating these
children while withholding from the district the opportunity
to meet this burden by taxing the real property on which the
children live or on which their parents are employed.
. . . .
The underlying philosophy of this section is that the
Federal Government, as a property owner, should pay to each
local educational agency which furnishes education to
children residing on or whose parents are employed on
Federal property an amount per child roughly equivalent to
the amount per child which other property owners in
comparable communities pay toward the cost of educating
H.R. Rep. 2287, 81st Cong., 2d Sess. at 7, 11 (1950).
As a consequence, Congress devised two levels of Federal
assistance in Section 238. Category A funding is available if
the child resides on Federal property and the child's parent is
either employed on Federal property or is on active duty in the
uniformed services. Section 238(a). If only one of these
requirements is met, i.e. either residence, or employment or
active duty status, the school district may only claim the child
as the basis for Federal funding at the lower Category B rate
which is one-half of the Category A rate. Section 238(b) and
(d)(1).See footnote 1
Fairbanks received funding for the children of Walden Estates
under Category B on the basis that the children's parents were on
active military status. It now asserts that these children
should be considered under Category A on the theory that Walden
Estates, where these children reside, constitutes Federal
property under Section 244(1).
Since 1950, Congress amended the definition of Federal property
periodically to further the goals of impact aid. During the
period in issue, the general rule which determined whether real
property constituted Federal property was set forth in Section
244(1) and provided--
(1) The term "Federal property" means real property
is owned by the United States or is leased by the United
States, and which is not subject to taxation by any State or
any political subdivision of a State or by the District of
Thus, Federal property was real property (1) which was tax-exempt
by virtue of Federal law, agreement, or policy and (2) in which
the United States had a presence by virtue of ownership or as a
lessee. 34 C.F.R. § 222.3 (1989).
The general definition of Federal property was supplanted by
secondary rules which addressed certain specific situations. The
secondary rule pertinent in this case was modified in 1953 and
again in 1967 and provided during the period in issue--
Such term [Federal property] also includes any interest in
Federal property (as defined in the foregoing provisions of
this paragraph) under an easement, lease, license, permit,
or other arrangement, as well as any improvements of any
nature (other than pipelines or utility lines) on such
property even though such interests or improvements are
subject to taxation by a State or political subdivision of a
State or by the District of Columbia.See footnote 2
Thus, this secondary rule permits real property to qualify as
Federal property even though that property includes a taxable
interest under an easement, lease, license, permit, or other
arrangement held by a non-Federal party.
The dispute between the parties is whether the lease arrangement
between the Dura Corporation, as the owner-lessor, and the United
States, as the lessee, created an interest held by the non-
Federal party (Dura Corporation) under an "other arrangement"
within the purview of this secondary rule.
Fairbanks argues that the term "other arrangement" must be
construed broadly such that it encompasses any non-Federal
interest, including a fee simple interest, so long as the
property has a non-taxable Federal interest in which the Federal
government is either the lessee or the fee simple owner. This
construction, according to Fairbanks, is consistent with the
statute which provides that the secondary rule "includes any
interest in Federal property . . . under an . . . other
arrangement." Section 244(1).
ED responds that, under the rule of ejusdem generis, the term
"other arrangement" applies in a more limited context, namely to
lesser or secondary real property interests and rights, and,
therefore, does not include the primary, underlying interest of
the fee simple owner in the real property.
Ejusdem generis is no more than an aid to construction and comes
into play only where there is some uncertainty as to the meaning
of a particular clause in a statute. Under this rule, "where
general words follow an enumeration of specific items, the
general words are read as applying only to other items akin to
those specifically enumerated." Harrison v. PPG Indus. Inc,, 446 U.S. 578, 588 (1980). It
rests on the notion that statutes
should be construed so that the "sense of the words . . . best
harmonizes with the context and the end in view." Gooch v. United States, 297 U.S. 124,
In the instant case, the term "other arrangement" is not defined
or amplified in the statute or the underlying regulations.See footnote 3
The term is vague and susceptible to more than one interpretation.
The statutory language of this secondary rule permits the
following specific taxable, non-Federal interests: an easement,
license, or permit. These interests are nonpossessory interests
in real property which allow an entry onto the land for a
specific purpose. This secondary rule specifically permits,
also, a taxable, non-Federal interest under a lease which is a
nonfreehold possessory interest in real property. Thus, the term
"other arrangement" is used within the context of nonpossessory
interests and a nonfreehold possessory interest in real property.
As such, the general phrase "other arrangement" under the rule of
ejusdem generis is limited to instances which are akin to the
aforementioned specific interests and therefore, may only include
a taxable, non-Federal interest which is either a nonpossessory
interest or a nonfreehold possessory interest in real property.
In the case at hand, Dura Corporation has a fee simple interest
in Walden Estates subject to the 20-year lease which constitutes,
under real property law, a reversionary fee simple interest.
This is a freehold possessory interest--an interest in real
property which is superior to a nonfreehold possessory interest
as well as a nonpossessory interest. The reversionary fee simple
interest holder is also the owner of the real property and
responsible for the payment of the real property taxes levied on
the property. Thus, Dura Corporation's interest is not akin to
the specific interests set forth in the statute and, therefore,
this interest does not constitute an "other arrangement" under
the secondary rule.
Fairbanks cites the legislative history concerning the 1967
revision to this secondary rule as support for the proposition
that this revision was so broad that Congress intended to
eliminate the tax exempt status of the property as the threshold
qualification and, therefore, even a fee simple interest held by
a non-Federal party would qualify under the "other arrangement"
terminology where the Federal government held a leasehold
interest as a lessee. This construction, according to Fairbanks'
main brief at 5, is further supported by the Section 238
requirement that the--
revenue generated from taxing the non-Federal interest would
merely be subtracted from the full Impact Aid assistance the
school district would have received if the non-Federal
interest had not existed.
Under Fairbanks' construction, the secondary rule engulfs and
negates the general rule in total. The 1967 legislative history
does not purport to negate the general rule in total and does not
address the present issue. Rather, it merely paraphrases or
restates the proposed revision which was ultimately adopted.
H.R. Rep. No. 188, 90th Cong., 1st Sess. at 11, 31 (1967) and S.
Rep. No. 726, 90th Cong., 1st Sess. at 37, 92 (1967 U.S. Code &
Cong. News 2730, 2768, 2802). Thus, it offers no assistance in
resolving this issue.
In addition, the deduct or offset provision in Section 238(e)
(1966) referred to by Fairbanks was not in force during the
period in issue as Fairbanks implies. Section 238(e) was
eliminated by the same 1967 legislation which enacted the
modification to Section 244(1) upon which Fairbanks relies.See footnote 4
Sections 201 and 204(d) of the Elementary and Secondary Education
Amendments of 1967, Pub. L. No. 90-247, 81 Stat. 783, 806, 808.
This action suggests that Congress viewed these newly permitted
taxable interests under this secondary rule as contributing
relatively nominal sums to the local educational agencies and,
therefore, did not warrant consideration in ascertaining the
amount of Federal impact aid assistance due a local educational
agency. As such, this supports ED's narrower construction of the
term "other arrangement," i.e. its a lesser interest akin to an
easement, license, etc., rather than the overly broad, fee simple
interest construction advocated by Fairbanks.
Fairbanks argues that the philosophy of the Federal impact aid
statute mandates that Walden Estates qualify as Federal property
so that it will receive Federal impact aid assistance as a result
of the children who reside therein. In its view, one of the
stated purposes of the Federal impact aid assistance is to
relieve the increased financial burden of educating federally
connected children by local educational agencies overburdened by
reason of increased federal activities. Fairbanks asserts that
Walden Estates adversely affects the school district in this
manner as it is undervalued (it had an assessed valuation of
$16.5 million in 1990 although its cost was over $20 million in
1988) and contains Federal housing with a disproportionately
large number of school children. The interaction of these two
factors, according to Fairbanks, results in a lower assessed
value per student for Walden Estates, i.e. $69,000 per student,
than the significantly higher assessed value per student for
Fairbanks' total over-all property, i.e. $189,000 per student.
Hence, Walden Estates produces significantly less local tax
revenue per student than other properties in the district and,
therefore, Fairbanks should be entitled to Federal impact aid
The exclusion of Walden Estates as Federal property rather than
its inclusion harmonizes with the philosophy of Section 238.
Section 238 provides assistance to the local educational agency
where the Federal government has deprived the local educational
agency of one or both of its two sources of taxes, i.e. the tax
revenues from the residential property in which the child resides
or the tax revenues from the commercial property in which the
child's parent is employed. H.R. Rep. No. 2287, 81st Cong., 2d
Sess. 7-11 (1950). Full funding under Category A is available
where both sources of tax revenue are denied the local
educational agency and lesser funding under Category B is
available where the local educational agency is deprived of one
of the two sources.
Here, Fairbanks received the lesser funding of the Federal impact
aid assistance as it was denied the tax revenues from the
commercial property in which the child's parent is employed.
Fairbanks was not, however, denied the tax revenues from the
residential property in which the children reside and, in fact,
received approximately $200,000 of tax revenues from Walden
Estates. Thus, the denial of full funding under the decision
herein is fully consistent with the philosophy of Section 238 and
precludes, in the view of Congress, an otherwise double benefit
to Fairbanks, i.e. the receipt of tax revenues levied on the
total property from the Dura Corporation as well as the receipt
of Federal impact aid assistance.See footnote 5
ED also argues, in effect, that the parenthetical phrase in this
secondary rule--Federal property "also includes any interest in
Federal property (as defined in the foregoing provisions of this
paragraph) under an easement . . ."--requires that the non-
Federal ownership interest in the real property comply with the
definitional aspects of Federal property. That is, the real
property must, as defined in the foregoing provision of Section
244(1), be (1) tax-exempt by virtue of Federal law, agreement, or
policy and (2) owned by or leased by the United States. Under
this approach and where, as here, the real property is leased by
the United States, ED asserts that the definition requires that
the ownership interest must be tax-exempt; otherwise, the real
property does not qualify as Federal property.
It appears that ED's position has merit. The parenthetical
language in this secondary rule incorporates the definition of
Federal property which, in turn, has these two requirements.
In view of the above, it is concluded that Walden Estates does
not constitute Federal property under Section 244(1) and,
therefore, Fairbanks is not entitled to Federal impact aid
assistance under Section 238(a).
On the basis of the foregoing findings of fact and conclusions of
law, and the proceedings herein, it is HEREBY ORDERED that
Fairbanks' appeal is dismissed with prejudice.
Allan C. Lewis
Administrative Law Judge
Issued: July 24, 1992
[i]n determining the total amount which a local educational
agency is entitled to receive under this section . . . for
the fiscal year, the Commissioner shall deduct (1) such
amount as he determines such agency derived from other
Federal payments (as defined in section 237(b)(1) of this
title) . . . .
Section 237(b)(1) defined the term other Federal payments as including "property taxes paid with respect to Federal property, whether or not such taxes are paid by the United States . . . ."