Tree Growth Primer: Evolving Towards Its Original Intention
(from Maine Townsman, February 1997)
by Jo Josephson

No stone is being left unturned these days in the search for property tax relief. So it is not surprising that Maine’s 25 year-old Tree Growth Tax Law has attracted no less than 18 bills this legislative session, some calling for its outright repeal, others for getting it off the backs of municipalities, but the majority calling for "full funding" of the program.

For no matter how you slice it, the fact that the Maine Tree Growth Tax Law gives preferential tax treatment to owners of timber and woodland by taxing their land on its productivity or current use and not on its highest and best use makes it a target for municipalities with a lot of land enrolled in the program, and for municipalities with valuable shore land enrolled in the program.

Some describe the law with its preferential tax treatment as one designed to encourage forest productivity and discourage development, while others describe the law as nothing more than a state program that subsidizes the forest industry off the backs of the state’s local property taxpayers.

Some say under the program there is no tax "loss", merely a tax "shift". Precisely, say others, pointing out that anytime you giving preferential treatment to one, it is at the expense of someone else. And in the case of tree growth, it is at the expense of the non-tree growth taxpayers in a municipality.

And the expense is mounting, they like to point out, given the fact that the reimbursement program has not been "fully funded" since 1992. By all calculations, municipalities have lost out on more than $13 million in reimbursements since 1992, with the municipalities claiming $21 million under the formula and only being reimbursed approximately $8 million. Recent calculation put funding of the program at about 40 percent.

And that fact has not gone unnoticed by Governor Angus King, who, in his State-of-the-State message last month, promised to "fully fund" the program.

Given the fact that Maine’s Tree Growth Program will be a focal point this legislative session, this article attempts to lay down a fundamental understanding of where the program has come from and where it is going. For if anything could be said about the Tree Growth Law, and that something has recently been said by Freeport Assessor Richard Main, it’s that the law has been evolving toward its original intent ever since it was passed 25 years ago.

45 Years In The Making

The Tree Growth Tax Law goes way back. While the law itself was not enacted until 1972, its origins stretch back almost 45 years to 1953 with the passage of the so-called "Chase Law" (36 MRSA, sections 563 and 564) and the establishment of what is today commonly referred to as the state’s forest land tax policy.

The law, which provided for little in the way of guidance to local assessors, and thus is referred to as "policy", stated that forest land was to be assessed on the basis of productivity, a.k.a. its current use, in order to provide an adequate incentive not to strip and sell the land for development, in order to provide an adequate incentive to manage the land on a sustained yield basis.

It would be almost 18 years before Section 8 Article IX of the Maine Constitution was amended to allow for the implementation of the law/policy. As a result of the 1970 amendment, current use was in when it came to assessing forest land; highest and best use was out.

It would be almost 20 years before the Tree Growth Tax Law, with its formula for determining the productive value of forest lands, was signed into law in 1972. It became effective in 1973. Fortunately for municipalities, the law has continued to evolve ever since, as some say, towards its original intention. It may in fact be the most tinkered with law on the books.

Fine-tuning Eligibility

So what does it take to take advantage of this preferential tax treatment? Ten acres or more of forested land (no ledges, water, bog or swamp included) and a plan to manage and harvest the land for commercial purposes. No more, no less.

Bare bones as this is, this has not always been the case.

For it wasn’t until 1981, almost 10 years after the law was signed into effect, that forest land was defined as "land used primarily for growth of trees to be harvested for commercial use…" Prior to that, forest land was vaguely defined as "land used primarily for the growth of trees and forest products."

It wasn’t until 1989 that landowners were required to file a sworn statement (as opposed to a plan) with the municipal assessor that a management and harvest plan had been prepared for the parcel and to submit every 10 years a sworn statement from a licensed professional forester that the landowner was managing the parcel according to the plan. Prior to 1989, management plans were not mandatory.

And it wasn’t until 1993, that land in tree growth that was not used primarily for the growth of trees to be harvested for commercial use but rather for "personal use" was eliminated from the program.

The TOWNSMAN (August 1993) has written extensively on the penalties assessed of those withdrawing from the Tree Growth Program because the assessing and collecting of penalties is perhaps the only job that is entrusted to municipal assessors under the Tree Growth Tax Law.

Still Defining "Commercial" Use

While progress has been made toward establishing a commercial basis for this law, the definition of "commercial" still has a way to go in the minds of some, who argue that as it currently stands it is not stringent enough to prevent landowners who do not truly use their woodland commercially to continue to qualify for the tree growth tax break.

It took more than 20 years after the law was enacted for the Legislature to define what it meant by the phrase "commercial harvesting". As of 1995, the term meant "the harvesting of forest products that have commercial value" such as "logs, pulp wood, veneer, bolt wood, wood chips, stud wood, poles, pilings, biomass, fuel wood, Christmas trees, maple syrup, nursery products used for ornamental purposes, wreaths, bow materials or cones or other seed products."

Critics of this definition of commercial harvesting argue that it has no quantifiable standards in terms of the value or amounts of forest products harvested. They point to the farmland tax exemption program as a model, noting that it requires a certain dollar amount of products be harvested from the land each year. Others note the impracticality of applying this to tree growth. That while it takes only a season to grow and harvest a farm crop, it takes at least a half century before one can harvest a tree crop.

Still Developing Management Plans

While progress has been made in the arena of management plans -- they are now required of those enrolled in the program -- environmental critics say there are not enough teeth in the current guidelines for developing such plans.

It should be noted that at the time this article was being written, a bill, LD 968, was making its way through the legislative process that would put more teeth into the mandated management plans.

Claiming that the Tree Growth Tax Law is nothing less than a subsidy for less than excellent forest management, environmentalists have designed a bill, sponsored by State Representative Paul Volenik, that would require the plans to contain silviculture-based standards. The bill is not surprising, given the recent forest referendum and the increased awareness of the declining state of the productivity of Maine’s forests.

The "recommended" standards would be established by the Commissioner of Conservation by September 1, 1998. In determining those standards, the commissioner would consult with guides such as those prepared by the U.S. Department of Agriculture's Forest Service. Under the proposed statute, landowners who fail to comply with the recommended standards will be subject to fines, penalties, and their land will no longer be eligible for the program.

It should also be noted that for those enrolled in the Tree Growth Program in 1989, the deadline for filing a management plan is but two years off, in 1999. The plan can be prepared by a licensed forester, or, as a result of changes in the law in 1995, by the owner and then reviewed and certified by a licensed professional forester. As noted, the plan need not be submitted to the municipality.

It is not clear whose responsibility, if it is anyone’s, to see to it that the plans are enforced on a yearly basis. While the forester who prepared the plan is required by law to swear every 10 years that the plan is being followed, much can happen in a space of 10 years.

Last but not least, it should also be noted that funds are available to help landowners pay for such plans. Once every 10 years an individual with a parcel of forest land greater than 10 acres is entitled to a tax credit up to $200 to pay for having a forest management and harvest plan developed. For further information, contact the Maine Forest Service at 289-2791.

How Much Municipal Land Is In Tree Growth? (sidebar)

At last count 3.65 million acres of the 10.4 million acres that comprise the organized territories (cities, towns and plantations) were enrolled in the Tree Growth Program. That translates roughly into 35 percent of the organized territories.

Critics of Maine’s Tree Growth Program say in its original conception, the program was not envisioned as a program for small property owners, but rather as an incentive to paper companies with large holdings in the unorganized territories. Whether it was envisioned or not, under the current law, as noted above, anyone with 10 acres or more of forest land can enroll in the Tree Growth Program.

Latest figures, based on 1993 enrollment provided by the Maine Forest Service, indicate that the majority (11,482) of the 11,775 landowners enrolled in the Tree Growth Program in the organized territories have holdings classified by the Forest Service as "small" (no more than 1,000 acres). Only 95 landowners enrolled in the program have holdings classified as "large (more than 5,000 acres).

A closer look at those with holdings classified as "small" indicate that a majority (9,606) of the landowners have parcels of 100 acres or less. Which is to say, 82 percent of those landowners enrolled in tree growth in the organized territories have parcels of 100 acres or less.

And last but not least, a closer look at the number of parcels of land enrolled in the Tree Growth Program in 1993 indicates that of the 18,587 parcels of land in tree growth in the organized territories, 76 percent were 100 acres or less in size.

One Municipal Official’s Perspectives on the Tree Growth Law (sidebar)

If Jonathan Thomas, administrative assistant in Surry, a coastal town in Hancock County, had his way, there would be a moratorium on land put in tree growth. Surry has almost 30 percent of its land or 7,251 acres in tree growth.

As Thomas sees it, the economics of the Tree Growth Program have not been well addressed. Thomas questions whether the current system guarantees the highest quality product at the lowest total cost.

"Anyone with 10 acres and a management plan can enroll in the Tree Growth Program, whether or not their land is highly productive forest land with good soils or marginal windswept coastal land with poor soils," says Thomas, adding that he does not believe the state cares about the productivity of the land, as it is not bearing the burden of the cost of the program.

As Thomas sees it, if there were no Tree Growth Program, a person wishing to go into the business of commercial forestry would not purchase land on Surry’s Newberry Neck where soils are poor and growth is slow.

Thomas says the problem for towns like Surry is, "Tree growth is like a spiral out of control, each year as one or more expensive properties goes into tree growth and taxes for all others increase, some of those others are then pressured to go into tree growth."