Tree Growth tax designation and its impact on property taxes and revenue was the topic at the May 11 Islands Coalition Meeting at the Island Institute in Rockland. And, like many issues, the implications of Tree Growth are very different for islands than for mainland communities.
As Jeff Kendall from the Maine Revenue Service put it, “Tree Growth works for the bulk of the state, but the islands are unique.”
The Tree Growth Tax Law was originally enacted in 1972 as a way to protect tracts of timber managed for commercial forestry activities. To qualify, landowners must have a minimum of 10 acres and, as of 1995, a forestry plan approved by a certified forester. To make up for lost tax revenue, the state is supposed to reimburse the municipalities 90 percent of the effective tax loss because of Tree Growth designation.
But on islands, Tree Growth classified land is perceived by some to be a “tax shelter” for large landowners rather than a land management strategy to ensure productive timberlands.
Island logistics and the low commercial value of most island forests preclude any substantial commercial timber harvest, so few of the lands placed in Tree Growth fulfill the law’s original intent. Yet, towns recognize the importance of having land set aside from development.
“There is an upside to having property in open space, in tree growth, because in some ways it adds to the value of other properties,” said Marjorie Stratton of Vinalhaven, vice-chair of the coalition. “I’m a hiker, I volunteer on building hiking trails, and on one sense, it is nice to have those properties set aside…but it would be wonderful if we could review the law.”
In fact the Maine Legislature’s taxation committee is currently reviewing the law. In their discussion, coalition members found several aspects of the current law that should be examined:
First, the definition of “commercial use” is extremely broad and includes everything from “logs and veneer” to “bough material or cones or other seed products.”
Second, although each property must have a forestry plan approved by a licensed forester, that plan is not required to be filed with the town. Thus, there is no way to monitor whether the plan is being followed. Furthermore, there is no penalty for the owners if the plans have not been followed.
Finally, there are several details of the law, specifically concerning tax revenue, that make it very difficult for islands to benefit from the program.
The legislature often does not appropriate enough money to reimburse towns for the program. The formula to determine reimbursement is complex and the calculations are based on county-wide average land values, not much higher local property values.
The coalition agreed that the Tree Growth Tax Law had some positive aspects. It keeps land from development and there are substantial penalties for removing land from Tree Growth. A town receives more of the taxes for land in Tree Growth compared with land in Open Space, another state current-use taxation program. The law puts the onus on property owners to update their forestry plans every ten years and whenever the property is sold — requiring little attention by towns.
Still, coalition members agreed, the most positive aspects of the law for many Mainers don’t benefit islands. Even if state reimbursement is funded, valuable island property is held in Tree Growth. With limited amounts of land to be taxed, the loss of revenue from Tree Growth land can have a clear impact on municipal budgets and means that other landowners must absorb the costs of the tax loss.
Because Tree Growth lowers the overall value of a town’s taxable land, municipalities with large amounts of land in tree growth are charged lower county taxes and receive higher school subsidies. But most islands have such high valuations that they receive no school subsidy.
On May 14, the Taxation committee held a work session on L.D. 543, “A Resolve to Establish the Maine Tree Growth Tax Law Committee,” and after hearing from lobbyists from the Forest Products Council and independent Rep. Thomas Saviello of Wilton and Rep. John Piotti (D-Unity), the House Chair of the Joint Standing Committee on Taxation, indicated that the committee would address this issue in the fall. The Islands Coalition will be submitting a letter in support of the formation of a committee to review the Tree Growth program.
Kendall, of the Maine Revenue Service, recommended that the coalition attempt to clarify the definition of “commercial forestry,” and work to expand foresters’ role and responsibility for certifying plans, to ensure that the designation is not abused.
“Start at the source with the forester,” he said. “You can’t blame the property owner who wants a break on his taxes. There are valid complaints that can be addressed to benefit the islands and we want to make this work as well for islanders as well as it works for everybody else.”
Kendall also recommended contacting the Forest Service and its director, Morton Moesswilee, and letting them know that people want Tree Growth properly enforced. He noted “the state is very current-use friendly and wants to encourage use of the Tree Growth designation to conserve open land. But they want the program to work.”
In addition to Tree Growth, the Islands Coalition discussed pending legislation that may impact the islands. This included updates on L.D. 1164, “An Act to Sustain Island Communities,” which would provide funds for ferry services that are not state-owned; the Peaks Island secession movement; the latest developments in the working waterfront current-use legislation and a continuation of the program that provides money to help preserve working waterfronts; LD 762, “An Act to Enhance a Community’s Capacity to Support Affordable Housing” and the latest news on school administration consolidation.
The coalition unanimously reelected Roger Berle as chairman and Marjorie Stratton as co-chair, and will meet again in August. q
Cyrus Moulton is Fellows Program Coordinator at the Island Institute.