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Is the tree growth tax break a scam? Coastal towns worry about lack of standards

Posted March 16, 2012, at 11:03 a.m.
Last modified March 16, 2012, at 3 p.m.

Poll Question

Eric Zelz | BDN

VINALHAVEN, Maine — To Vinalhaven Town Manager Marjorie Stratton, elements of the state’s Tree Growth Tax Program just don’t make sense.

The 40-year-old law allows landowners to set aside their forested properties for eventual timber harvesting and pay much lower property taxes, but Stratton said that in many cases in her island community the program looks to her like a way for people to dodge their financial liabilities.

“A lot of people who have very valuable property in the shoreland zone put it in tree growth, but then never really do anything with it,” she said. “They’re not following through with any kind of forestry plan. It greatly reduces the amount of property taxes we can collect.”

Stratton is not alone in her concerns. The Legislature’s Taxation Committee last month unanimously endorsed a bill, sponsored by Senate President Kevin Raye, R-Perry, that would direct the Forest Service to perform an annual, random survey of properties in Tree Growth to check for conformance.

The bill would focus the Forest Service’s efforts on waterfront properties. Raye said most of the complaints he hears about Tree Growth occur in coastal towns where it seems unlikely that a landowner can commercially harvest timber while adhering to shoreland zoning standards.

Under the law, which is meant to ease development pressure with the goal of preserving woodlands for the forest products industry, landowners must hire a licensed forester to develop a decade-long management plan, which is held by the town. That plan may or may not call for timber to actually be harvested during the 10-year life of the plan and may state that a forest will not be mature enough for harvest for many years.

“The requirement is that the primary use of the property has to be the growing of trees for commercial forest products,” said Don Mansius, director of forest policy and management for the Maine Forest Service. “Realistically, at some point in the course of that forest’s life, that forest is going to get cut.”

But the management plans are secret, which Mansius said is a provision that protects proprietary information that a forester wouldn’t want his competitors or customers to know. Some say that leaves municipalities with no way to determine if a plan is being followed or if a property owner is simply dodging taxes.

“We can look at the application but we’re not supposed to look at the plans, which is another thing that seems ridiculous to me,” said Stratton, who in addition to her municipal job is a member of the Maine Municipal Association’s Legislative Policy Committee. She said Vinalhaven has about 1,300 acres enrolled in the program, which in 2007 cost the town about $27,000 in revenue collections that had to be shifted to other property owners.

“A large landowner who would sell to the large pulp factories, that’s an example where I can see they wouldn’t want their plan to be open to the public,” said Stratton. “But for a guy who’s got a summer home on the shore, what’s the secret?”

In a 2009 report to the Legislature on the Tree Growth Program, the Maine Municipal Association raised concerns about the misuse of the program, especially in waterfront areas. The group cited examples of heavily wooded shorefront land that showed no signs of harvesting and wooded plots being set aside as “common areas” in campgrounds or subdivisions.

Even if such practices conform to the legality of the Tree Growth Statute, they are likely to violate its purpose, the MMA said.

Mansius said of the 11.2 million acres in the program statewide — which comprises about 60 percent of Maine’s forested land — the vast majority of landowners use the program appropriately.

Still, there are some who don’t agree, which is one reason why the Taxation Committee supported the bill requiring random reviews of tree growth properties to make sure the law isn’t being abused.

In fact, the Maine Forest Service supports the bill. “The proposed legislation for carrying out random annual surveys by the Maine Forest Service would help determine if and where and how big or small the problem is,” Bill Beardsley, commissioner of the Maine Department of Conservation, which oversees the Maine Forest Service, said in a statement Friday. “It would separate fact from hearsay and provide a foundation for modifications.”

Rep. L. Gary Knight, R-Livermore Falls, is co-chairman of the taxation committee.

“It’s long been rumored that many people, especially along the coast, have gone into tree growth for the wrong reasons,” said Knight. “The bottom line is that there’s got to be a plan to ultimately harvest the wood.”

The tree growth law has come under additional scrutiny lately when State Treasurer Bruce Poliquin of Georgetown was accused of having land in the program that, according to his deed, can never be logged. But Knight said that issue has nothing to do with the bill being crafted by the committee.

“When those bills were filed I don’t think any of us on the committee knew Mr. Poliquin had property in tree growth,” said Knight. “This is not about Bruce Poliquin. It’s about getting information on the tree growth program.”

Earlier this week, Poliquin applied to the Georgetown Board of Selectmen to withdraw his land from the Tree Growth program. Poliquin will attempt to transfer about 10 acres of his property into the state’s Open Space program, according to the Lewiston Sun Journal.

If approved by the Georgetown selectmen, Poliquin would still receive a significant property-tax break — about 50 percent of his most recent valuation of $943,000.

However, the abatement would be far less than Poliquin has received under the Tree Growth program, which has allowed the treasurer to pay about $30 a year on the 10-acre parcel, a savings of roughly $30,000 every year since he enrolled in the program in 2004, the paper reported.

Moving the property into Open Space would allow Poliquin to avoid larger penalties that would come if he simply withdrew from Tree Growth.

Board Chairman Geoffrey Birdsall said the board was likely to approve Poliquin’s transfer application. Birdsall added that the town would not seek to penalize Poliquin or to recoup the taxes he hasn’t had to pay over the past eight years.

Birdsall told the Sun Journal the Poliquin scrutiny was likely “an intent to personally attack” the treasurer. However, he said, the matter had brought some needed attention to the Tree Growth program and other abatement laws were sheltering “millions” in property valuation.

Birdsall said the town would continue its evaluation of all town properties in Tree Growth.

According to data from Maine Revenue Services, the state’s organized territories had about 3.6 million acres split among 22,700 parcels in tree growth in 2010, worth approximately $519 million. About 200 parcels were removed from the program that year, which led to penalties for the property owners of nearly $100,000.

David Ledew, direct of Maine Revenue Services’ Property Tax Division, said there are no records concerning how much money property owners have saved in the program because the formulas are complex, set county-by-county and administration of the program happens at the local level.

“It’s just not as simple as computing what their tax would have been if the property were assessed at just value,” said Ledew. “No one has ever attempted to quantify” how much property tax revenue is diverted through the tree growth program.

“I’d be surprised if anyone has even attempted that in one municipality,” Ledew said.

Stratton said the program is just one example of the Legislature trying to provide relief for landowners without regard for the impact on municipal revenues.

“Some people feel like their taxes go up as all of this land comes out of being taxed at full value,” she said. “Tree growth is a mess. It doesn’t seem to be working but they keep adding more current-use legislation loopholes. If I had a magic wand I’d probably do away with the whole current-use tax law.”

The forest products industry sees it differently, according to Jonathan Metrick, a spokesman for the Maine Forest Products Council.

“We’re totally supportive” of the tree growth tax law, he said. “The contractors and loggers who are cutting it depend on the flow of wood.”

Mansius, of the Maine Forest Service, agreed and noted that the program helps property owners avoid paying exorbitant property taxes and by extension, keeps some of Maine’s most prized land from being developed.

“Under the program, land is valued for its ability to grow timber, and not for its ability to grow houses and housing developments,” he said. “The key is that landowners want to keep working forest land as working forest land. Maine would be a very different place if we didn’t have the tree growth tax law.”

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