Rough waters ahead for Plum Creek

Cut timber. VTD file photo by Josh Larkin.

Cut timber. VTD file photo by Josh Larkin.

Editor’s note: This story first appeared in the Barton Chronicle. Paul Lefebvre is a staff writer for the Orleans County weekly.

MONTPELIER — A legislative end run to give Plum Creek, the single largest landowner in the country, a financial break for violating terms of its current use contract on 56,000 acres in northern Essex County is running into opposition from the program’s regulators.

The Senate Committee on Agriculture has attached an amendment to a jobs development bill that would change the program’s penalties for large landowners and, at the same time, save Plum Creek thousands of dollars in property taxes.

For Plum Creek, the expulsion of 56,000 acres from current use would cost the company roughly $167,000 more in property taxes a year. Over five years it would pay an additional $837,000 in taxes. Under the law, Plum Creek could reapply for admission into the program at the end of five years.

In the amendment proposed by the Senate Committee on Agriculture, penalties would be imposed on an escalating scale. A first violation would remove three times the acreage involved in an illegal cut; a second violation would remove 50 percent of a landowner’s entire parcel enrolled in the program; and a third would result in a 100 percent expulsion.

If the bill passes with the amendment intact, the new scale of penalties would be applied retroactively — much to the disapproval of those who administer the program.

“It’s a very bad message,” said Chris Recchia, deputy secretary of the Agency of Natural Resources during a meeting Tuesday, two business days after the committee had already passed the amendment.

The proposal is coming at a time when Plum Creek is facing a five-year expulsion from the program — which allows participants to pay property taxes on the basis of use rather than development potential — for violating terms of its forest management plan during a cut on a 140-acre parcel in Lemington.

The company is fighting the expulsion on two fronts. In court it is seeking to overturn the violation, while at the same time asking the Legislature to change the law regarding penalties, arguing it is unfair and unreasonable to expel 56,000 acres for an illegal cut on 140 acres.

 

As a longstanding program to protect the state’s working landscape, current use presently reduces property taxes by roughly 88 percent for 14,000 participating landowners, according to John Meyer, a consulting forester and a co-chairman to a citizens’ coalition committee on current use.

If what designates a parcel were redefined to constitute those acres within a town line, Mr. Meyer suggested, then a penalty could be struck that would remove only the parcel where the illegal cut occurred.”

Meyer and Commissioner Michael Snyder of Forests, Parks and Recreation told the committee that any changes to the program should be publicly vetted and reviewed before passing into law.

But Sen. Bobby Starr, D-North Troy, defended the committee’s decision last Friday to put its amendment into play without taking more testimony or calling on a study committee to review the issue.

“People send us here to make decisions,” said Starr, who argued that legislation was time sensitive. “If we’re wrong, throw us out of office.”

Snyder argued that the effects of making a mistake in the way current use is administrated would be more important than any politician’s career. A former legislator could go on with his life, “but the rest of the program suffers and we have to live with it,” he said.

Action on the bill is expected to be delayed so two other committees can take a look at it before the measure is taken up by the full senate.

During two days of testimony before the committee, there was widespread agreement that the penalty component of the program needs to be changed.

The stickler was whether the new penalty scale would be applied retroactively to violations over the last year — which is to say Plum Creek. If so, the company would see about 1,400 acres removed as the illegal cut on the 140 acres occurred on a 470-acre tract earmarked for harvest.

Plum Creek is one of four landowners in Essex County that own more than 5,000 acres. And it’s the first landowner enrolled in current use to bring the issue of penalties to the attention of the Legislature, according to Starr, who said he has been involved in the program since day one.

As a program, current use was implemented essentially to help small landowners facing development pressure qualify for a tax break as long as they continued to work the land. It was not a program intended for large timber companies like Plum Creek. But changes in the property tax to fund education, noted Commissioner Snyder, prompted more and more large landowners to enroll in the program. And their participation, he said, has changed the way county foresters administer the program on the ground.

Required by the rules to submit a harvest plan, large timber companies were permitted to operate within a certain leeway, said Commissioner Snyder. A flexible working relationship with regulators, he added, allowed them to submit amendments to their cutting plans, according to the needs of the market.

Sen. Robert Starr

Sen. Robert Starr. VTD file photo by Josh Larkin.

Over the years, the commissioner said, the relationship between the county foresters and large landowners has worked pretty well.

But it was not set in statute.

And out of this give-and-take relationship, the state alleges that Plum Creek stepped over the line, despite repeated warnings.

Matt Langlais, county forester for Caledonia and Essex, was the inspector who cited Plum Creek with a heavy cut violation. His boss, Snyder, told the committee that the forester had previously found ways to help the company meet its production goals and still stay within the program’s rules.

But the relationship may have become too one-sided.

Mr. Langlais told the committee he had repeatedly given Plum Creek chances to come into compliance.

“It was strike three,” he said, speaking of the cited violation. “The 143 acres was where the line was drawn.”

Sen. Philip Baruth, a first-time legislator representing Chittenden County, said he wanted an escalating penalty system that would keep bad actors in line by increasing the consequences for repeat offenders. But he added he was uncomfortable with a penalty that would treat a large landowner unfairly who erred.

He was not alone.

Fears the expulsion facing Plum Creek would give current use a black eye prompted Mr. Meyer to question what constitutes a parcel in the program. Presently, a parcel is land with 25 or more contiguous acres that might cross town lines. Plum Creek’s 56,000 acres, for example, is designated a single parcel that crosses eight town lines. And under the present law, any violation and the entire parcel is out.

If what designates a parcel were redefined to constitute those acres within a town line, Mr. Meyer suggested, then a penalty could be struck that would remove only the parcel where the illegal cut occurred. In Plum Creek’s case that would be the 9,000 acres it holds in the town of Lemington.

The company has repeatedly argued that the penalty it is facing is way out of proportion to the violation. Starr sought to take that one step further Tuesday when he asked how much the company made off the illegal cut.

“I bet they were not all $600 logs,” he said.

A “back of the envelope” estimate by Mr. Meyer on the harvest report that Plum Creek is required to file suggested an earning of less than $100,000 from the cut.

Commissioner Snyder took exception to that estimate, saying that not knowing the market variables at the time the wood was sold made it impossible to come up with a reliable figure.

“It was not the back forty,” he said, characterizing the cut as heavy, adding later that Plum Creek’s earnings for the second quarter of 2010 came in at $258-million.

Still unknown is the impact the violation and penalty could have on the management of land that was formerly part of the Champion Lands and is presently encumbered with a public access easement and a working forest easement held by the Vermont Land Trust.

Those easements, noted Mr. Recchia, also give Plum Creek a break on the taxes it pays.

More testimony is expected on the amendment when the jobs bill goes before the Senate Finance Committee and the Senate Committee on Appropriation during the next several days.

Comments

  1. Governments are floundering and the state wants to give these lawbreakers a break?? I would not object if it were not business as usual for them or if it were an actual mistake, but I object vociferously that they be allowed to benefit by retroactively having a law made to save them hundreds of thousands of dollars!!

  2. Jane Stein :

    I’m confused. Don’t the penalties need to be severe enough to actually keep companies/individuals from deliberately violating the rules? I know nothing of this case other than what I just read in this article, but if the Plum Creek people went ahead and committed the violation despite being told repeatedly they were out of line, it would seem that the current penalties aren’t even harsh enough to keep them from doing it. And they should therefore be lessened?

    I don’t get this.

  3. Tom Pelham :

    Senator Starr’s “People send us here to make decisions” ad hoc approach to the administration of state law is a recipe for chaos in government and demoralizing to earnest state employees. The fact is that the legislature did make a decision and that was that if a county forester and ANR certified to the Tax Dept. that a current use beneficiary violated their forest management plan that the Tax Department would remove the affected parcel from the current use program. Matt Langlais, a reputable county forester, did his job citing Plum Creek for clear cutting 140 acres along a stream and, after some legal research affirming the definition of a parcel given the large amount of land enrolled in current use by Plum Creek, ANR notified the Tax Dept. as required by law and the Tax Dept. moved to remove the affected parcel from the current use program.

    Now comes Senator Starr and possibly his fellow Senators to retro-actively amend the decisions made by his predecessors and undermine the good work of County Forester Langlais for the benefit of Plum Creek. In 2010, Plum Creek reported revenues of $1.190 billion (bigger than Vermont’s entire 2010 general fund revenues) and net earnings of $213 million that afforded shareholders a respectable 4% dividend yield.

    http://finance.yahoo.com/q/is?s=PCL+Income+Statement&annual

    One might applaud the aggressive response of Plum Creek to the finding of a violation in Vermont on behalf of their shareholders but Senators might bear in mind that the $167,000 penalty imposed by the State amounts to a barely measurable .0008 of Plum Creek’s net earnings. Plum Creek may have 56,000 acres enrolled in Vermont’s current use program but this fact alone should not afford them special treatment. Their penalty is proportional to the tax benefits they’ve received from the program. If a $1,670 penalty were being imposed for a violation on 1.4 acres of a 560 acre parcel, I doubt the Senator’s would be seeking retroactive changes to the law on behalf of the owner. If Plum Creek has been treated unfairly, their proper remedy is in court and not in the statehouse hallways.

    Whether current use or healthcare, it’s important that our legislator’s maintain their balance in the face of pressures from the expensive suits prowling the statehouse hallways and seeking self-interested advantage.

  4. I accidentally cut two acres of a pine forest that was coming down around my house to make some pasture for my cows, and I paid the penalty. I didn’t ask legislators for special favors to make up for my mistake. At a time of budget shortfalls, we are allowing corporations to pay a corporate minimum tax of $250 and proposing to cut deals for big timber companies? How about if everyone pays their fair share. Why are legislators talking about an extraction tax for bottled water but letting all these corporations secretly avoid taxation?

    This is from a 2007 Vermont Guardian article:
    A recent report by the Joint Fiscal Office found that of the 23 out-of-state companies with Vermont taxable income of more than $1 billion, two paid only $250, which is the alternative minimum allowed by the state. In the $100 million to $1 billion taxable income group, 22 of the 140 companies only paid $250, and 25 of the 111 companies with taxable income of $50 to $100 million paid $250.

    Meanwhile, Vermont companies of the same size pay based on their taxable income, and it’s not until you get into taxable income below $10,000 that you see Vermont companies taking advantage of the alternative minimum.

    In fact, of the 860 companies with taxable income of $10,000 to upwards of $50 million, only two filed for the alternative minimum payment of $250. Both of those companies were in the $10,000-$25,000 income group.

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