Andy Kerr

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

Western Oregon BLM Federal Public Forestlands:

Shared Responsibilty: Each Level of Government Must Do Its Share

There are solutions that don't involve reverting back to the bad old days of logging the crap out of these lands Any sustainable solution needs to be shared responsibility between the federal, state and county levels of government.

Randi Spivak of Geos Institute authored Shared Responsibility: The Conservation Community’s Recommendations to Equitably Resolve the O&C County Funding Controversy. Here is a summary she wrote:

The 18 O&C counties want $110 million annually in perpetuity from the federal government—an amount that is comparable to the average of the three highest years of O&C timber receipts. In order for the counties to receive that sum from timber receipts (at the current 75% revenue sharing with BLM), at reasonable timber prices the BLM would have to log 1.3 billion board feet of logs per year. This would mean returning to a time when Oregon was clearcutting two square miles weekly of old-growth forest, watersheds and clean water sources were being polluted and Oregon’s historically bountiful wild salmon runs were in jeopardy of going extinct.

The counties view it as “payment-in-lieu-of-taxes” as the O&C lands were on their property tax rolls until the federal government took them back from the railroad that violated the terms of the congressional land grant. For comparison, if the O&C lands were still in private ownership and taxed as private timberlands are in Oregon, these counties would collect ~$8 million annually in taxes.
The increased logging being proposed through various legislative proposals will not resolve the county funding issue— rather multi-faceted solutions at the federal, state and county levels of government are needed.

New Equitable Approach Needed

To equitably resolve the political crisis surrounding the financial problems of counties in Western Oregon and the long-term protection and restoration needs of Western Oregon Bureau of Land Management (BLM) holdings, it will take concerted action by the U.S. Congress, the Oregon Legislative Assembly, the Governor of Oregon, and the affected counties.

The report suggests specific ways the federal, state and county government can all fund their shares of a responsible solution to address the financial impasses regarding county revenues, the need for increased conservation and restoration of these lands and waters. The full report is attached. The report was endorsed by Coast Range Association, Cascadia Wildlands, Klamath-Siskiyou Wildlands Center, Oregon Wild, Sierra Club and The Larch Company.

How Shared Responsibility Would Work

Assuming the $110 million annually sought by the O&C Counties is justified in perpetuity to fill in gaps in current county budgets, under a shared responsibility approach, each of the three levels of government should assume responsibility to meet one third of that goal, or ~$36.7 million each.

• The federal government can meet its share by legislating the reallocation of the perpetual administrative savings achieved by transferring 2.6 million acres of federal public lands now managed by the Bureau of Land Management to the Forest Service and the Fish and Wildlife Service.

• The State of Oregon can meet its share by adopting a modest increase in the Oregon Forest Products Harvest Tax on private timberland owners, or by reinstating the severance tax, which the Oregon Legislature first reduced and then eliminated by 2005. California and Washington both have a severance tax. Private timberland owners in Oregon have been and are benefitting from increased timberland values and log prices due to reduced levels of logging from federal lands and the booming private log export market to China.

• The O&C Counties can meet its share by modest increases in property taxes by utilizing a portion of presently under-utilized existing taxing authority.

Why the Need to Share Responsibility?

It is important for the counties themselves, as well as the State of Oregon, to join the federal government in doing their fair share.

The counties, because the most timber-addicted of them have some of the lowest property tax rates in the nation.

The state, because it doesn't allow counties to tax private timberland at the same rate as it does for other assessed properties (nor does it assess a severance tax on private timberlands as does Washington and California).

The feds, because it should compensate the counties in lieu of paying taxes.

For any legislative solution to be passed by the U.S Congress, the State of Oregon and the 18 O&C counties must demonstrate that it is willing to help address their own needs.

Senator Ron Wyden’s principles for an O&C Solution support Oregon sharing responsibility to address its county fiscal issues. Shared responsibility is not only good and fair public policy, it’s politically necessarily to persuade Congress to adopt any locally developed solution. Even The Oregonian has editorialized of the need.

Below are some papers I've produced relevant to the issues, several of which are cited in Shared Responsibility noted above:

Shared Responsibility for O&C Funding: Cost Savings of Transferring Western Oregon BLM Lands to the Forest Service to be Part of the National Forest System.

Transferring the federal public forestlands in Western Oregon now managed by the Bureau of Land Management to the Forest Service (some should go to the Fish and Wildlife Service) would result in administrative savings adequate to pay the fed's fair share to resolve the O&C county payment crisis. There would also be money for jobs doing ecological restoration thinning and watershed restoration. It would also result in better land and resource management.

Oh, where to find the money? The federal government is broke, etc. etc. etc.

Actually, there is money to fund the fed's share of shared responsibility in re O&C county funding—with money leftover to create jobs from watershed restoration and increased ecological restoration thinning. All that is necessary is for Congress to transfer 2.6 million acres of  federal public forestlands (lower case national forests now managed by BLM) to the National Forest System to be managed by the Forest Service under the National Forest Management Act (some should go to the National Wildlife Refuge System, managed by the Fish and Wildlife Service).

The BLM budget for its lands in Western Oregon is $168.6 million/year. The Forest Service could manage the lands for $55.2 million/year. That would leave $36.7 million/year to go to the O&C Counties (federal share of $110 million/year). That would leave $42.2 million/year for watershed restoration in western Oregon (55% of remainder) and $34.5 million/year for ecological restoration thinning in Northwest Forest Plan area (45%).

The result would be an additional 118 million board feet of additional commercially valuable logs each year, which could produce 1,350 jobs. Another 688 jobs would come from watershed restoration work, which helps imperiled salmon and improving water quality for domestic consumption.

Why such a savings between BLM and Forest Service Management? It's because BLM is a severely bloated bureaucracy that spends money far in excess of what the Forest Service does to do the same things. And the Forest Service does a better job. The following is from the report Cost Savings of Transferring Western Oregon BLM Lands to the Forest Service to be Part of the National Forest System:

By nearly any metric analyzed, the BLM is far less efficient than the USFS. Compare the BLM and the Forest Service in Western Oregon:

• Both have the same number of primary land management administrative units: 5 BLM Districts and 5 National Forests.

• An average BLM District is 38% the size of an average USFS National Forest.

• An average BLM Resource Area is 56% the size of a USFS Ranger District

• An average BLM District (467,072 acres) is far closer in size to an average USFS Ranger District (320,526 acres) than it is to an average USFS National Forest (1,217,999 acres).

• The BLM Oregon State Office has 63% more staff attributable to Western Oregon land management than does the USFS Regional Office, while also having 54% less managed land.

• BLM spends $73.37 per managed-acre per year, while USFS spends $21.47—71% less.

• BLM manages 2,044 managed-acres per employee, while USFS manages 3,829—87% more.

• In FY11, BLM sold 209 million board feet of logs, while the USFS sold 217 million board feet.

• Considering only the timber sale line item for each agency, BLM spent 100% more that the USFS did to produce a board foot for sale.

• Considering the entire budget for each agency, BLM spent 64% more than USFS did to produce a board foot for sale.

All that redirected money for the 18 O&C counties and all those jobs, and 2.6 million acres of new national forests and national wildlife refuges for this and future generations!

Shared Responsibility for O&C Funding: Increasing Oregon Timber Taxes.

Oregon could reinstate a severance tax comparable to Washington or California. Or it could increase the Oregon Forest Products Harvest Tax and use the revenues to fund the state's share of addressing the O&C county funding crisis.

Not only is it it good and fair public policy that the State of Oregon do its fair share to address the O&C counties funding crisis, it is politically necessary to show the rest of Congress—beyond those in the Oregon Congressional Delegation—that the State of Oregon and the 18 O&C counties are taking steps on their own and are not sitting idly by expecting Uncle Sugar to carry the entire load.

The State of Oregon used to have a severance tax (see chart below from the Oregon Legislative Assembly Legislative Revenue Office). The State of California and Washington tax the sale of timber at the rates of 2.5% and 5% respectively.

None of the current Oregon Forest Products Harvest Tax that is collected goes to support the general welfare of the state, but only to state programs that directly benefit the timber industry, such as enforcement (such as it is)  of the Oregon Forest Practices Act (such as it is), Oregon State University Forest Research Laboratory, Oregon Forestland Protection Fund and the Oregon Forest Resources Institute.

To raise $36.7 million annually so the state could pay its fair share of the O&C shortfall, the FPHT would have to increase $9.21/MBF, assuming 2004-2011 average timber prices and 2001- 2010 average cutting levels.

Unlike property and income taxes that are levied as percentage of value or income, the FPHT is a set dollar amount levied for each 1,000 board feet of logs (after the first 25,000 BF exempted annually). For example, if the price of logs doubles, the tax remains the same. Although the income has doubled, the effective tax rate is halved.

Due to booming export markets, in November 2011, Douglas-fir #2 sawlogs in southern Oregon were selling for $545/MBF, If an additional tax of $9.21/MBF was levied, the effective tax rate would be 1.7% of log value.

On average, 81% of the tax is paid by private timberland owners, who have seen their land and log values increase as dramatically as federal timber logging levels have decreased. Log values on state lands (8% of average) have also increased due to reduced logging levels on federal lands.

Alternatively, the Legislature could reimpose a severance tax on the sale of logs. If it matched the State of Washington tax rate of 5%, the additional revenues could be earmarked for conservation purposes or could just go into the General Fund to pay for state services that contribute to the general welfare.

Oregon private timberland and private log values have increased dramatically due to the reduction of federal timber sales. The State of Oregon should capture some of this windfall to benefit the affected counties.

Increasing Oregon Timber Taxes is a paper that documents and details what was summarized above.

You will also find attached a copy of Oregon Private Timberland Owners Not Paying Enough State Timber Taxes.  Here is the abstract of that paper:

The owners of 7.9 million acres of private timberlands in Oregon pay far less than their fair share (compared with what others pay in other states) or even enough for the state to recoup the cost of providing government services to them. None of the state tax collected on timberlands is spent for the common good. Of the very modest Oregon Forest Products Harvest Tax paid on the logging of all timber on essentially all lands, regardless of ownership, 100 percent goes to pay for programs that primarily and directly benefit the timber industry. Historically, the amount of state timber tax monies collected has been three to six times greater than the current level. State timber tax rates are tied to the volume, rather than the value, of timber cut. The result of both conditions has been shortfalls in the provision of government services at both local and state levels. As federal logging levels have declined, log values have increased. Part of this windfall received by timberland owners should be captured to help pay the state’s fair share of replacing declining federal timber payments to counties.

Shared Responsibliity for O&C Funding: Increasing County Property Taxes.

If the timber-addicted O&C counties would just raise their property taxes a little to contribute their fair share toward resolving their funding crisis, most would still have property taxes lower below the state average. Alternatively, taxing private timberlands in the same manner as other private property in the counties would do the trick as well.
Not only is it it good and fair public policy that the 18 O&C Counties do their fair share to address the O&C counties funding crisis, it is politically necessary to show the rest of Congress—beyond those in the Oregon Congressional Delegation—that the State of Oregon and the 18 O&C counties are taking steps on their own and are not sitting idly by expecting Uncle Sugar to carry the entire load.

The O&C counties have some of the lowest property tax rates in the nation (hard to explain away when one is trying to persuade Congress to pony up funds in these tight times).

There are two generally fair and just ways for counties to increase their revenues meet their fair share ($36.7 million of the $110 million annually the counties are demanding) of replacing federal timber receipts:

1.    On their own, counties could utilize existing unused taxing authority to modestly increase property taxes; and/or

From the paper entitled Increasing County Property Taxes:

The 18 O&C Counties have unused existing taxing authority that could make-up 100% of the cost of replacing the O&C Fund. To meet their shared responsibility of one-third of the total AOCC demand of $110 million annually to replace the O&C Fund, property taxes in the 18 western Oregon counties would have to rise between 0.03% (Washington County) and 12.21% (Douglas County).

While Douglas County taxpayers would see their property taxes go up 12.21% to meet their shared responsibility, their current tax rates are 26.4% below the Oregon average property tax rate and would still be 17.4% below the Oregon average.

Because of the multi-decade windfall from massive clearcutting of public forestlands, several of the O&C counties’ property tax rates are among the lowest in the state and the nation. It is fair and just that county governments share responsibility with the state and federal governments to replace the O&C Fund.

2.    The Oregon Legislature could scrap the special property tax assessment structure and bring private timberlands up to the same tax rates as everybody else on the property tax rolls.

Here is the abstract from Oregon Private Timberland Owners Not Paying Fair Share of Federal Income Taxes:

The owners of 7.9 million acres of private timberlands in Oregon pay far less than their fair (compared with what others pay) and just (based on wealth) share of county property taxes. Very low taxes on Oregon private timberlands are rationalized as helping to prevent, or at least forestall, development. They do not. County property tax revenues from private timberlands have not kept pace with increasing property values. In 2010, private timberland owners paid $19.5 million in local property taxes. Had they been taxed in the same proportion as their contribution to the state’s total taxable assessed value, they would have paid $30.6 million. Had they been taxed in the same proportion as their contribution to the state’s total taxable real market value, they would have paid $111 million. For property tax purposes, their holdings are valued at $1.9 billion; in fact, the real market value of the holdings is $10 billion. Other property class owners pay higher county property taxes as a result. The current Oregon system of assessment and taxation of property in general—and of private timberlands in particular—is unfair and unjust. As federal logging levels have declined, private timberland values have increased. Part of this windfall received by private timberland owners should be captured by the counties to help pay their fair share of replacing declining federal timber payments to counties.