In 2023, the U.S. Department of Energy (DOE) paid Aiken County $1.62 million in lieu of taxes for its 72,471-acre portion of the Savannah River Site (SRS) that is in the County.

DOE has been paying this same nominal amount since 2009.

The SRS Payment in Lieu of Taxes is considerably higher than the tax payments that would be levied if the entire property were used strictly for agricultural purposes, including timber production, but appear substantially lower relative to other large industrial enterprises in Aiken County.

For example, Bridgestone paid nearly $3.0 million in 2023, and five other companies paid at least $0.25 million.

by Don Moniak
July 24, 2024

The recent debate over the House of Raeford chicken slaughterhouse and processing plant shed public light on the concept of “Fee in Lieu of Taxes”, wherein counties negotiate tax incentives to attract larger industries and employers. (1)

The Department of Energy’s (DOE) Savannah River Site (SRS) occupies 198,344 acres of land across three counties (Aiken, Barnwell, and Allendale), of which 72,471 acres are in Aiken county. The total captial investments across the site easily exceed $100 billion.

If it were privately owned, DOE/SRS would, like Bridgestone, Kimberly Clark, Autoneum, and numerous other major local employers, be paying a negotiated Fee in Lieu of Taxes. (FILOT).

However, since federal property is exempt from taxes, the best and only deal since ~1969 for Aiken County to recoup lost revenue from the land has been to arrange for a Payment in Lieu of Taxes (PiLT) with DOE.

In his June 2024 newsletter, Congressman Joe Wilson (R-SC) described a portion of an exchange he had with one of DOE’s highest-ranking officials:  

“With the (Department of Energy’s) Savannah River Site transitioning from an Environment Management to a National Nuclear Security Administration (NNSA) site, there were concerns about PiLT being impacted. During a House Armed Services Committee hearing, I asked NNSA Administrator Jill Hruby if there would be any changes and she testified that everything would remain the same. I am also grateful to have language included in the FY25 NDAA that reaffirms NNSA’s commitment to fund PiLT.” (2) 

Congressman Wilson’s lob-ball question had a self-congratulatory air to it. The National Nuclear Security Administration (NNSA) was already one of many DOE program offices involved in the PiLT program; there was no reason to believe it would not be at SRS.

In fact, DOE had already paid $1.62 million to Aiken County for Calendar Year 2023, or $22.35 per acre. On April 16, 2024, Aiken County Council approved a Resolution, as part of its Consent Agenda, to accept the 2023 Payment in Lieu of Taxes from DOE (Figure 1). 

The questions that were not asked by Congressman Wilson, or at least not reported, were “How much should DOE be paying,” and “Why is DOE paying the same Payment in Lieu of Taxes today that it has paid since 2009?” 

The PiLT at SRS

Payments in Lieu of Taxes (PiLT) are generally defined as “payments that help local governments offset losses in property taxes due to the existence of nontaxable Federal lands within their boundaries.”  The Savannah River Site (SRS) is is one of twelve Department of Energy (DOE) nuclear facilities sites that require a Payment in Lieu of Taxes to the local communities in which they are located.

The calculation of this payment is based in large part upon acreage, estimated value, the assessment ratio, and the property tax rate; which in turn is dependent upon what the land use classification would be if the lands were privately owned. In the case of SRS, the question of whether that classification would be commercial, residential, industrial, and/or agricultural/forestry is much more challenging because of the enormity of the site.

According to a 2020 General Accounting Office report that assessed inequities and inconsistencies in the program, PiLT payments have always been calculated to “reflect the revenues communities would have received had the property remained on the tax rolls in the condition in which it was acquired.” (In the case of most of the DOE nuclear weapons production complex, “acquired” also involved the forced relocation of entire existing communities.)

The conditions in which the SRS properties were acquired (or seized, depending on one’s outlook) in the early 1950’s included the basis of “highest and best use” at the time of the acquisition, defined as the “highest and most profitable use for which the property is adaptable and needed in the reasonably near future” in the year before the properties were seized. Though that may all sound confusing, it all boils down to “what were the uses of the land before being acquired” and “what would be the near-future potential of the land if it had not been acquired.”

When SRS was developed in the early 1950’s, the dominant land uses were of agricultural and timberland purposes; with scattered commercial enterprises, including a veneer plant and some small sawmills. Although “reasonably near future potential” would undoubtedly have included some private industrial facilities similar to those in Augusta, whether was this factored into the early Payment in Lieu of Taxes is not evidenced.

In 2007, DOE and Aiken County adjusted the per-acre value for Aiken and Barnwell Counties, establishing a property value of $1,641 per acre and $712 per acre, respectively. The GAO reported that:

“According to county officials, the counties and DOE agreed to use a negotiated rate rather than a rate based on current assessment values partly because of the difficulty of conducting appraisals because of the large amount of land, lack of comparable properties, and the high expense of an appraisal. Because of this reliance on a negotiated, rather than assessed value, it is unclear whether these payments reflect the revenues the counties would have received had the property remained on the tax rolls in the condition in which it was acquired. Had DOE required independent review of key determinants of PILT payments, this deviation from using assessed values might have been avoided.”

The $1.6 Million Aiken County PiLT payment.

In 2023, the Aiken County Assessor’s Office (3) determined that the 72,471 acres of SRS property in the County had a market land value of $217.4 million, or $3,000 per acre; an 83-percent increase over the 2007 negotiated PiLT rate that involves a mix of agricultural and industrial taxation values.

Agricultural and forest lands taxation values vary according to soil productivity.

As a few points of reference, the owner of a 1,663-acre managed forestland a few miles southwest of SRS had a tax bill in 2023 of $2,169; or $1.31/acre. The owner of a second, more productive site closer to the Savannah River paid $2.05/acre. And the owner of a 98-acre forested parcel closer to the SRS boundary paid $113 in property taxes in 2023; or $1.15/acre. 

Northeast and downwind of SRS, Walther Farms paid $15,525 on its 3,748-acre farm along Oak Ridge Road northeast of downtown Windsor; or $4.14/acre.

Since the SRS property is composed primarily of forested lands that are largely managed for timber production, their PiLT of $22.35/acre could be viewed as quite a reasonable deal for Aiken County.

But the SRS landscape also includes dangerous nuclear facilities and some of the most toxic radiochemical waste stews in the nation; including ~34 million gallons of unstable “tank waste” composed of highly radioactive “sludge” and “low-level saltcake.” From this perspective, a $1.62 million a year payment could seem very insufficient; as it does little to pay for the advance planning for emergency contingencies in the case of a major nuclear accident at SRS; and certainly not the reduced property value, real or perceived, of nearby lands in such an event. 

For example, the $600 million SRS/Plutonium Settlement of 2020 was obtained by arguing, in part, that the risks of long-term plutonium storage posed unnecessary risks to local communities. While plutonium storage in K-Area poses substantial dangers, the hazards are relatively benign compared to the high-curie contents of the radioactive sludges in F and H area, the irradiated fuel stored in L-Area, and ongoing tritium processing operations.

Even if there was an absence of existing radiochemical hazards at SRS, the PiLT is relatively meager compared to the Fee in Lieu of Taxes (FILOT) paid by other large industrial enterprises in Aiken County (Table 1).

Despite land values in Aiken County having increased substantially since 2007, the DOE/SRS Payment in Lieu of Taxes has remained flat for 16 years. No matter how the numbers are sliced, it is obvious that the Department of Energy is not paying a fair Payment in Lieu of Taxes (PiLT) relative to other industries and non-agricultural property owners.

(From Top Left to Bottom Left: The Defense Waste Processing Facility, the H-Area Industrial Complex, a schematic of K-Area Plutonium storage and disposition-to-waste facilities, and the Savannah River National Laboratory footprint (within red boundary lines).

Footnotes

(1) Fee in Lieu of Taxes (FILOT) 

The South Carolina Department of Revenue summarizes FILOT as: 

“Industries that invest at least $2.5 million in South Carolina may negotiate for a fee-in-lieu of property taxes. This can result in a savings of about 40% on property taxes otherwise due for a project. Certain large investments may be able to further reduce their liability by negotiating the assessment ratio from 10.5% down to 6%. For large investments, the assessment ratio can be reduced down to 4%. 

The county and the industry may agree to either set the millage rate for the entire agreement period or have the millage change every five years in step with the average millage rate for the area where the project is located. Any personal property subject to the fee in lieu of property taxes depreciates in accordance with South Carolina law, while the real property is either set at cost for the life of the agreement or can be appraised every five years.

A fee in lieu of property taxes is granted by, and at the discretion of, the county where the project is located. The industry must make the $2.5 million investment over a five-year period to qualify. Large investment projects have eight years to meet their increased investment requirements. During this period, all property that is placed in service pursuant to the agreement is subject to a fee instead of ad valorem property taxes. 

A county may give the industry an additional five years to complete the project and place new property in service subject to the fee. A single piece of property can be subject to the fee for up to 40 years with the county’s consent. The total project can be subject to the fee for up to 50 years with the county’s consent.” 

“Encourages retirees to settle here, who benefit from low property taxes. Their limited retirement income isn’t greatly penalized by the high income tax.  Conversely, this tax structure is hard on businesses and manufacturing. It encourages fee-in-lieu of tax agreements and special source revenue credits to get around high property tax rates on large industrial developments. In essence, the left hand must undo the damage caused by the right.” 

(2) SRS remains a Department of Energy (DOE) site. Although DOE’s “semi-autonomous” National Nuclear Security Agency (NNSA) has replaced DOE’s Environmental Management (EM) division as the SRS “landlord,” the site retains a very substantial EM mission. More jobs still remain in EM than in the weapons program. (See: We Need the Space.) 

 The Department of Energy’s Payments in Lieu of Taxes (PILT) program, as authorized by the Atomic Energy Act of 1954 (P.L. 83-703, 42 U.S.C. §2208). DOE Directive 143.1.A details the requirements of the PiLT program at DOE nuclear facilities sites.

GAO Report 20-122 provides extensive details and background of the DOE PiLT program.

(3) While the Assessor continues to list the owner as “Atomic Energy Commission (AEC), C/O Department of Energy,” in all actuality, the AEC was abolished in 1974 and divided into the Department of Energy and the Nuclear Regulatory Commission. The Department of Energy now owns the Savannah River Site. 

Just one year ago, the County Assessor’s SRS Parcel Summary reported the site as being in the New Holland Fire District, and listed the land type as being “Commercial 6%.” That listing has since been corrected to read “Government Property.” 

Fire district locations are not directly reported within the Parcel Summary. To determine which fire district a property falls in, a land database user must go to the mapping function and click on “fire district” in the legends list. In this case, SRS properly is shown as being in the SRS Fire District.  

(4) Complete List of the “actual general fund portion of the FILOT payments for Fiscal Year 2024” to Aiken County in 2023; provided by Aiken County Finance Department. (FY 2024 ended on June 30, 2024)