Andy Kerr

Conservationist, Writer, Analyst, Operative, Agitator, Strategist, Tactitian, Schmoozer, Raconteur

Federal Payments to Timber-Addicted Counties

Until the northern spotted owl hit the fan in 1989, most counties in Oregon enjoyed federal payments of 25 percent of gross receipts from the sale of timber off of National Forest System lands. For Bureau of Land Management holdings in western Oregon—most of which are the so-called “O&C” (Oregon and California Railroad revested) lands—the counties were paid 75 percent of gross timber sale receipts. The payments were supposed to compensate the counties for not being able to collect property taxes on federal public lands. As a result, property owners in these timber-addicted counties (TACs) enjoyed some of the lowest property tax rates in the nation, along with a high level of county and school services.

Until the first judicial injunctions brought most logging of northern spotted owl habitat to a halt, the monies came mostly from the sale of old-growth forest. These forests were being logged at a rate of more than three square miles each week on federal public forestlands in Oregon. Since then, Congress has periodically authorized a program, the most recent name of which is “Secure Rural Schools” (SRS), that provides alternative payments to the TACs. Over the program’s several incarnations, the amount of funding (as a fraction of the highest and most obscene annual average logging levels) has declined. Still, the funds are far more than what the TACs would get by taxing the federal timberland as if it were in private ownership, particularly because timber companies are assessed at a far lower rate than most other property owners (and therefore are thus being subsidized by other property owners).

Most, but not all, TACs have moved on. In some counties, voters have approved increases in property taxes to maintain local services. In most counties, services have been reduced to account for decreased federal funding. The last SRS funding went to the counties in March 2016, and an effort led by Oregon Senator Ron Wyden is under way to reauthorize the program. Wyden is a natural leader in this cause since half of the SRS funds nationally go to Oregon (and again, especially western Oregon counties).

Over the decades, interest has waned among most county boards of commissioners in these alternative payments to fill potholes and educate children. During the 1990s and 2000s, the county commissioners clamored for the alternative payments. Today, some commissioners have just moved on and are living on the revenues they have. Local economies are diversifying. There are just not as many TACs today as in the past. However, other county commissioners are doubling down on restoring logging levels to their previous unsustainable high. They are betting that with Republicans in control of both houses of Congress and the White House, the good old days are just around the next bend.

The Forest Service has noted that existing timber sale levels would have to increase 600 percent for the TACs to get the payments they used to get from federal timber receipts. By the way, this estimate assumes that the price of logs is inelastic and that prices will not drop as supply sextuples. A number of events would have to occur for federal timber levels to rise to meet the hopes of the TACs, including these:

• repeal of the federal Endangered Species Act

• repeal of the federal Clean Water Act

• repeal of the National Environmental Policy Act

• repeal of the National Forest Management Act

• repeal of the Federal Land Policy and Management Act

• a 600-percent increase in annual congressional appropriations for federal timber sales

• a change of mind by most Oregonians, who have decided that they would like the last of the older forests to remain standing

The likelihood of all these events taking place is astonishingly small.

Why are these commissioners from the TACs insisting that they only want federal money if it comes from the sale of ancient tree flesh and not if it comes directly out of the federal treasury? I think there are at least two major reasons. First, some of these commissioners are just true believers who think that their world will come back to its senses and resume the liquidation of old-growth forests. Second, it’s about re-election. Commissioners in the TACs fear crossing local timber barons who own the local mill (and mill, singular, is increasingly accurate in more Oregon timber counties). Big timber has deep pockets, and it wouldn’t take much money to fund a challenger to any TAC commissioner who deviates from orthodoxy. Ironically, even in the most timber-addicted of the TACs, the voters do not favor increasing federal logging just so they don’t have to pay more taxes.

In the early 2000s, Senator Wyden could have made the alternative of straight federal funding instead of timber sale payments an entitlement—like Social Security or Medicare—for the TACs. The TACs turned it down. It had to be federal money from federal timber sales, or they would fight on. They did fight on, but now they are losing the fight. Historically, the conservation community has strongly supported SRS payments. Such payments relieved political pressure to resume harmful logging. However, such increased logging is now unlikely, and it’s not like the remaining TACs are appreciative. They continue to agitate to liquidate old-growth forests.

The solution to funding vital and desirable local government services through counties is threefold:

1. Increase county property taxes.

Even with Oregon’s constitutional limitations on property taxes, most TACs have room to increase taxes, if their voters are willing. If not, it’s a local issue, not a federal case. If private timberland were taxed at the same rate as most other properties in the county, much more revenue would be available for local government services.

2. Increase state timber taxes and share the revenues with the counties.

Oregon, unlike most other states, essentially levies no tax on either standing timber (ad valorum tax) or when timber is sold (severance tax). If Oregon were to tax timber at a reasonable rate, it could share the money with the counties.

3. Provide for true payment in lieu of taxes for federal public lands within counties.

It is a settled matter of constitutional law that local and state governments cannot tax the federal government. Yet the federal government receives services, such as fire protection and roads, from local government. As one would like the local fire department to come put out a fire at a federal post office, for example, the federal government makes payments to local governments. For federal forestlands, it was historically a share of timber receipts, even though all out of proportion to what the federal government would pay if it were taxed by local authorities.

There is only one true payment-in-lieu-of-taxes (PILT) program. All the rest are politically driven formulae intended to transfer monies from the federal taxpayer to the local taxpayer. That one true and fair PILT program applies to ~80,000 acres of federal public forestland in Coos and Douglas Counties, Oregon. In the 1800s, the federal government granted alternate sections (square miles) of federal land to a company that agreed to build a wagon road from Roseburg to Coos Bay. The Coos Bay Wagon Road Company failed to perform its obligations, and the land was reconveyed to the federal government. What had been on the county property tax rolls was no longer. Congress enacted a law that stipulated that a committee “to consist of a representative of the Secretary of the Interior, one representative for the two counties interested, and a third person satisfactory to the Secretary of the Interior and the county officials” would determine how much the Coos Bay Wagon Road (CBWR) lands would produce in local property taxes were the lands still in private ownership, and the federal government would then pay this amount directly to the county governments. Between 1960 and 1993, it worked out to be an average of 12 percent of federal timber receipts from those lands. That’s less than one-half of what counties were paid from timber receipts from the National Forest System and less than one-sixth of what the O&C TACs were paid.

In 1927, Justice Oliver Wendell Holmes noted, “Taxes are what we pay for civilized society.” The timber-addicted counties need to become more civilized.