Montana DOR: Great.
Montana DOR: So, not on the official agenda, but probably do quick introductions, again, just so everyone's familiar with each other.
Montana DOR: You bet.
Montana DOR: more than our other committees, but it's still always good to do introductions. So, I'm Bryce Kotts, I'm a compliance executive with the Property Assessment Division. Amanda Funk, Business Analyst for Agricultural and Forest Valuation.
Montana DOR: Robin Rude, Deputy Administrator for Property Assessment. Tiffany Polley at Harris, Valuation Unit Manager with Property Assessment. Patton McKelvey, just a visitor. I'm on the, Montapper Donor Association report.
Montana DOR: And I'm Paul McGenzie with FHolesale Lumber Company.
Montana DOR: Nancy Happy, a representative for private landowners.
Montana DOR: Randyman.
Montana DOR: Hi, I'm Jared Ice, and I'm a columnist here at the Department of Revenue.
Montana DOR: Hey, Gordy?
Gordy Sanders: Gordy Sanders, retired from Pyramid Mountain Lumber, representing industrial forest landowners.
Montana DOR: Senator Fern?
dave fern: Good afternoon, I'm Dave Fern, Senate District 2, Whitefish, Columbia Falls, North Flathead area.
Montana DOR: Commissioner Chuka?
Greg Chilcott: Greg Chocott, Ravalla County Commissioner.
Montana DOR: Peter.
Peter Kolb: Peter Kolb, MSU Extension Forestry Specialist and, current president of the Montana Forest Owners Association.
Montana DOR: Hola?
Paula Gilbert: Hi, I'm Paula Gilbert, I'm the Administrator for the Property Assessment Division.
Montana DOR: Bill?
Bill Billman: Hi, I'm Bill Billman, I'm a business analyst with the Property Assessment Division.
Montana DOR: Yeah, negative one.
Megan Moore, LSD: I am Megan Moore with the Legislative Services Division.
Montana DOR: Great. Well, thank you, everyone, for taking the time to meet with us, and… go over…
Montana DOR: What this committee has some purview over, and is responsible for, kind of, advising the department on.
Montana DOR: I think everyone hopefully got the agenda ahead of time and all of the materials that we're going to kind of be covering throughout the meeting.
Montana DOR: With that, I'll kind of hand it over to you, Paul, to…
Montana DOR: Sure, so yeah, so, so once again, so this is the advisory committee, just to help guide, Department of Revenue and some of the technical aspects of how they value Class 10 forest land. So.
Montana DOR: I think everyone's seen the reports and the data that were sent out earlier, and so Jared, if you want to give us this kind of an overview.
Montana DOR: of, process and challenges that you had in your appraisal? Any questions that you think you may want to, consider, or in your process? That'd be great.
Montana DOR: Sure, yeah. Again, I'm Jared Isom, I'm an economist here with the Tax Policy and Research. I'm just going to go over this, stumpage value.
Montana DOR: summary report. Just as a refresher, many of you were here 4 years ago, when you helped us in the Tax Policy Research Division build this model that was based on a previous model from the University of Montana.
Montana DOR: It takes,
Montana DOR: timber sales data from the Montana Department of Natural Resources, because it's publicly available, and we take the winning bid prices, for those timber sales,
Montana DOR: And based on various other characteristics that are included with those sales, we use those winning bids to predict what the stumpage values are for these… for those, sales, for the four zones that, make up the state of Montana.
Montana DOR: We can dive a little bit more into the model if you guys want to, we can talk more about that if you're interested. But essentially, it produces stumpage value in dollars and dollars per thousand board feet for each of the board zones throughout the state.
Montana DOR: So, for this reappraisal cycle, I just added the fiscal years 2024 and 2025, sales from the Montana Department of Natural Resources and Conservation to the model.
Montana DOR: You go to that second page on that table one, it just shows how many sales there were in each zone.
Montana DOR: The work that I added to the model, so those last two rows, you can see there's plenty of sales in the northwestern and southwestern zones, but just one sale in the central zone for each of the last two years, and then just one sale on the east road zone is totally fine. None in 2024, or, you know, 6 or 7 or 8 years before that, so…
Montana DOR: That's, the main reason why we use a regression model instead of just a simple average is because those central and east zone, there's just not enough publicly available data to do a simple average, so we need to do the regression to
Montana DOR: Give them a better idea, more accurate representation of the values of those signs.
Montana DOR: When you go down to Table 2, on that same page, those top two rows, 24 and 25, are what is new. Those are the stoppage values from…
Montana DOR: the analysis I just did this year, out of those 2 years. They're lower in all of the zones than in 2023, and in three of the four zones, they're the lowest of the last 10 years, which means they were dropped from
Montana DOR: disc cycle's Olympic average, because they were the lowest. And you'll also notice in the east zone, we had a negative stumpage value for the first time. We can talk more about that if you're interested.
Montana DOR: Essentially, it's not… it's not something we need to be too concerned about right now, because again, it's a drop from this…
Montana DOR: cycles Olympic average, but if it continues this way for the next 3 and especially 4 reappraisal cycles, and we start looking at maybe the 10-year Olympic average being negative in the East, then we'll have to
Montana DOR: make some decisions on how we want to handle that, but as of now is not a big deal, but it is something to, track and be aware of.
Montana DOR: And yeah, we can go further into that, or any of the… any of the models.
Montana DOR: specifics that you want to, that's kind of the overview and what the stumpage values did over the last two fiscal years.
Montana DOR: Questions from the committee members?
Montana DOR: I'm surprised that the central is higher than the Southwest, is that…
Montana DOR: Partially due to the pyramid closing?
Montana DOR: I don't know the specifics at all why that would be. It is different than we've seen in the last
Montana DOR: Few years, but they are generally fairly close, so I don't know the specifics, of why, but probably based on what we, those sales that happen in those zones and the variables that are required there.
Montana DOR: Like, probably some of the dynamics and the location of the markets might be playing in that, and, you know.
Montana DOR: college cost.
Montana DOR: And the distance to the existing markets for that southwest zone, especially with the species they have down there out ponding.
Montana DOR: Might be affected in those overall structured value, especially on the state lands.
Montana DOR: Any questions from folks online?
Montana DOR: the model?
Bill Billman: Not seeing any.
Montana DOR: Okay, so, yeah, I mean, I think, you know, I've reviewed it pretty closely. I think it's pretty representative of what we're seeing in the general market as well. We are seeing log values that are coming down based off the current number of markets that we're dealing with just nationally.
Montana DOR: So I think that is pretty representative. I think the discussion on the eastern zone is something we've been worried about for a while, you know, and I think it's going to deserve
Montana DOR: some additional discussion going in. It's good to hear that, you know, your estimation that 3-4 cycles off before it becomes really critical, where we actually end up with a negative average dumpage. Well, one of the times, I don't remember, but do you remember what the averages were from the previous cycle?
Montana DOR: Have that handy by chance? You have the average based off of this. But you mean the 10-year, 11-year-ups? I don't have… I'm out on my computer pretty easily. 25, the average guy is curious how they've responded to the 25. Do you have an amended evaluation?
Peter Kolb: Question?
Peter Kolb: Is there any average and maximum minimum of timber sales associated with these?
Peter Kolb: So, how much volume, on average, do these, stumpage prices represent? Because stumpage prices are going to vary based on how much volume is available per sale.
Montana DOR: Yeah, that's a good question, and I could pull up the exact sales that I use in the model, but I…
Montana DOR: The volume of the sales is one of the variables that is included in the model, so that is taken into account with these… with these averages.
Peter Kolb: Right, but… It'd be nice to know what the mean and the range is.
Montana DOR: Sure, yeah, I can do that. Do you want it for, each zone?
Montana DOR: Or just overall, for all the sales that happened. Because, again, like, the eastern and the… and the central zones, there's 3 total sales that I could give you. So I could just give you the volume of that one sale that we had in the.
Peter Kolb: Sure, I mean, any of that information is helpful when just trying to evaluate this.
Montana DOR: Sure, I'll put that together, and I can send that out, after the meeting with the… with the summary. Thank you. That works.
Montana DOR: Well, your question was the summit values for last cycle? Yeah, 45, yeah. Yeah.
Montana DOR: We have, for the Northwestern, it was $222.95.
Montana DOR: Southwest was 184.85.
Montana DOR: Central… 139.58.
Montana DOR: And then East was $42.98.
Montana DOR: Thank you. Sweet me to see you.
Montana DOR: A drop going down there, which would be expected.
Montana DOR: That's over time.
Montana DOR: Alrighty, any other questions on the… on the model? Pierre? That's a good question. That is something we wrestled with.
Montana DOR: When we developed the model, because we don't have private landowners reporting sales value, there's no way to capture fall-volume sales coverage values, but it is certainly something we did.
Montana DOR: we did struggle with, and thought we had addressed it the best we could through the adjustments that we've built into that model, but it's a point well taken. Do you want to talk about the cost side now, or do you want to…
dave fern: Thanks a lot. Is there any reason to believe That private sales would be…
dave fern: Significantly different in the zones than what the figures represent.
Montana DOR: Senator Fern, I think that that's a good question. I think this is the best we can do to represent what an average stoppage value is, and in fact, to Peter's point, obviously, if you have a larger timber sale, if you're doing
Montana DOR: you know, a full section of timber harvest, the cost side of that is going to be lower, so the potential is that there could be a higher soput value on those versus a small
Montana DOR: you know, a 20-acre track where the cost to move in and move out, and the other ancillary costs get higher, and so the net stop of value to the private lander could be lower, depending on what they included in that harvest. And so,
Montana DOR: you know, I think it's a… it's a point well taken, and there's always been a disparity between large landowners and small landowners within this
Montana DOR: Class 10, but I think that the… that the stumpage ranges, coupled with the
Montana DOR: The taxable rates and what we have is a pretty good estimation of a reasonable valuation.
Montana DOR: Of the timber on both types of ownerships.
dave fern: Do we have any… any idea of the proportions?
dave fern: Involved with the larger… Sales that you're tracking here versus everything else.
dave fern: Is everything else kind of a small percentage, or would you…
dave fern: Would we be able to know that from…
dave fern: Tax, you know, tax returns and that sort of thing, and earnings and things, or is it…
dave fern: Is it just kind of a guess?
Montana DOR: We've never looked into it. I'm not sure we'd be able to…
Montana DOR: Pull that out and separate it.
Montana DOR: I don't know. You guys, like…
Montana DOR: I don't know either. We could look at it, but… I think it's unlikely.
dave fern: Good enough. I'm… it's just curious that we, you know, when you have some data missing, that you kind of have to guess a little bit.
Montana DOR: I think it's a matter of us having data missing, you know, this is the… it's like any appraisal process, you have to come up with that methodology to develop
Montana DOR: since we don't have transactional evidence to go by, it's kind of the best you can do, Senator, on this. So, I'm delighted to discuss that.
Montana DOR: topic a little bit later in the meeting as we get into some discussions of where we go from here, moving ahead, boss, please.
Montana DOR: Any other questions from committee members?
Montana DOR: Okay? Did you want to talk about costs now? Yeah, I can definitely run through it. Sure, we just kind of go over the memo, and maybe remind us…
Montana DOR: Where you guys get your portions and expenses? Yep.
Montana DOR: So, I, we get our expense information from the DNRC.
Montana DOR: We take…
Montana DOR: Their expense ratio, so we have the fire assessment fee, we have the education fee, we have the slash disposal fee.
Montana DOR: And forest management expenses. So we take those, and then that provides us, like, a total forest gross cost. Like, this is what the DNRC has projected to… this is the gross cost of it. And then we take that one step further, and then we…
Montana DOR: Apply the net ag income, so we…
Montana DOR: look at the timber layer, we have our GIS analysts look at the timber layer, and then they provide a
Montana DOR: grazing ag income as if that timber wasn't there. What would be… what would be the value of that land, essentially? So, we then deduct that from the gross to provide a net forest cost.
Montana DOR: And as you can see, costs have gone up a little bit between 25 and 20… our next reappraisal in 2027.
Montana DOR: By those net costs going up, your value per acre, per se, is gonna come down a little bit.
Montana DOR: So, if you look in Zone 1…
Montana DOR: For this re… the current cycle that we're in.
Montana DOR: $637.50 an acre, and it's gonna go down to about $584.25 an acre in value per acre.
Montana DOR: And then that just runs down the board in Zone 2. And then if you look at Zone 4, which is where the
Montana DOR: That negative sale was inward. The concern is that it's going from $65 an acre down to $57.63 an acre.
Montana DOR: And then if you look at the, right below that, it just shows the percent changes between the two cycles.
Montana DOR: So if you look to the right where it says 2025 average, I'm just gonna go to Zone 1. It gives you the average productivity for that zone.
Montana DOR: It gives you the average productivity value
Montana DOR: And then multiplied that by your forest acres, so it's going to give you the total value for that zone. So your total value for Zone 1 in 2025 was $740…
Montana DOR: 2 and change million dollars, and it's going to decrease down to $680 million in value.
Montana DOR: With the way the… with the cost and stumpage values.
Montana DOR: Take out there.
Montana DOR: Question for Amanda on the…
Montana DOR: On that report, we're talking about that second one commemorandum that was sent out there, summarized, starts with the cost, the front page.
Montana DOR: Goes through the adjustments for agricultural income at the top of the second page, and then gives you a summary of average, productivity based off of
Montana DOR: So… Huge zone there, so… Of course, averages are always dangerous, but…
Montana DOR: But in general, we're gonna see a reduction in
Montana DOR: total valuation doesn't necessarily mean a reduction in taxes at all. And you can see that some of the forest acres have changed, too, and that just comes from land being, you know, some land may be moved out of taxable forest into non-taxable forest, or people may have decided to
Montana DOR: subdivide, and they no longer qualify for forest, or they just…
Montana DOR: removed all their forest and put it into another year. So, there's many reasons as to why those acres may change in those zones.
Montana DOR: Lori, your hand up?
Gordy Sanders: Yeah, just a question. It looked to me like, didn't the slash costs go down?
Gordy Sanders: And my question is, you know, went 18 cents to 17 cents, and it seemed like that would not be appropriate, because…
Gordy Sanders: The cost of slash Certainly, goes the other way.
Montana DOR: These numbers are given, provided to us from the DNRC.
Gordy Sanders: Yeah.
Gordy Sanders: Bridget.
Gordy Sanders: Since costs increase every year,
Gordy Sanders: I was just surprised that it went down.
Montana DOR: According to my guess, this is the state slash disposal fee, and so a volume breaker went down, then…
Montana DOR: Harvester volume breaker went down, then you would see the…
Montana DOR: It's all the costs down, so it's not an actual slash of all the costs, it's just the…
Montana DOR: Slash our equiprium cost.
Montana DOR: I guess.
Montana DOR: We went back to Senator Byrne's question about the breakdown. I wonder if there'd be a way for us just to kind of categorize
Montana DOR: But,
Montana DOR: Broadly, maybe into 3 categories where you had, like, 20 acres or less with the ownership, and then you did, like, a
Montana DOR: Why don't you do, 160, and then you did over 160. I think that might be informative.
Montana DOR: We could look into it. The problem I perceive is sometimes there are adjacent parcels that would, yeah.
Montana DOR: would be separated in the data, but could be combined, that'd be hard, so we wouldn't be able to capture that, but we could still do it and see if there's anything interesting, but it comes up.
Montana DOR: Yeah, and I don't think we'd be able to easily tell you, like, if this is public or private.
Montana DOR: land, if that… if that's something you're interested in, I don't know if we can do that.
Montana DOR: easily, but we could just split it out into… I guess I would look at the tax rules, not the harvest data. Yeah, yeah. Yeah, so there wouldn't be any public…
Montana DOR: Stated there, Greg.
Montana DOR: Mainly still. Those, we just don't want to scrutinize it heavily, so we don't forest or U.S. government ownership or state land ownership that would have timber, potentially, classification.
Montana DOR: Given the discussions we saw, starting to get ready as the last legislative session, trying to differentiate, you know, between
Montana DOR: legitimate ag, and recreational properties, and tying that to sizes. Maybe trying to dig into that might be…
Montana DOR: Proactive on our behalf to have some data available.
Montana DOR: Consider some of those discussions.
Montana DOR: Any questions or comments on… On the average valuations?
Montana DOR: I pulled the reports I get, that I receive from DNRC regarding a slash.
Montana DOR: disposal fees.
Montana DOR: To help maybe answer 40's questions. So, in their fiscal years, for… 20… 2023, per se.
Montana DOR: They… Noted about 40,000… $40,000 worth of… slash fees.
Montana DOR: And then… In 25 fiscal year, their slash fee was $36,800, so it went down from
Montana DOR: In those two years.
Montana DOR: That's off crushed, or is that off of the…
Montana DOR: Hazard. Yep, so our reports come from… it's a two-fold, so it's forestry and trust, and so we get those numbers from the forestry side. So that's… that's the Sunshine program.
Montana DOR: Alrighty, so who's have you gotten?
Montana DOR: The first two docs covered, want to go over four-zone assessment reviews.
Montana DOR: Brilliant.
Montana DOR: I guess the point here is, we have some changes in 2021, we haven't getting changes since then.
Montana DOR: That I'm aware of. So it's an opportunity for discussion with the community or the…
Montana DOR: We've been in original whether or not
Montana DOR: There are already needs that change in the zone now.
Montana DOR: I look forward to questions or comments on that document.
Montana DOR: If you remember back in 2021, that was probably the most movement we've seen in the zone maps, and…
Montana DOR: History, and we moved a couple of those from the southwest zone into the central zone.
Montana DOR: Then, swap two between zone 3 and 4 in the north and the south end of the…
Montana DOR: with the state
Montana DOR: I guess my observation, I don't see any particular burning need to change these, unless somebody else does a different thing.
Montana DOR: They're removed.
Bill Billman: Gordy's got a.
Montana DOR: I agree.
Gordy Sanders: Yeah, just a comment. I, you know, looking at the zone and the map and the changes that we did last… in 2021, you know, I don't see any reason to make any further adjustments.
Montana DOR: Yup.
Montana DOR: That was easy.
Montana DOR: Unfortunately, Great.
Montana DOR: All right, so on to our, kind of, our open group discussion. Is there anything else that, anybody, anything else that folks on the call or in the room want to add to the agenda before we get into our group discussion?
Montana DOR: Do you have covered us?
Montana DOR: Peter will come here and pop it, Peter Circle any day.
Montana DOR: So let's talk a little more about Zone 4. So Zone 4 is Eastern Montana, and
Montana DOR: As we know, we have a couple of challenges in Zone 4 that we've always had. Obviously lower productivity in general in those sites.
Montana DOR: Different types of forest management.
Montana DOR: And then, a shift towards preponderance. Refinery supplying, although there is a fair amount of Douglas firr out there, and then a change in markets for, for wood products in Zone 4, and so…
Montana DOR: You know, as the stopage rates have shown, it's a long ways the market's out there, and a little lower value product wouldn't get into a market.
Montana DOR: So the resulting stomach values become more difficult.
Montana DOR: And we're getting less markets out there. I shouldn't say that, I guess we've had a few spawn mills that have popped up in eastern Montana that serve
Montana DOR: Small areas of concentrations of…
Montana DOR: Our recline, I think, early, so we might see a little more market activity out there.
Montana DOR: You know, the challenge might be just getting the data, because the state school trust programs may not reflect
Montana DOR: those small market outlets accurately. So we can talk about if there's another way to gather information for… for Zone 4.
Montana DOR: Other than just using, DNRC data. We've talked different times about trying to use
Montana DOR: A transactional evidence or a residual value type appraisal out there. Seeing that is going to be a little bit difficult.
Montana DOR: And we… we could talk about
Montana DOR: looking to see if there are other agency sales, whether it be BLM or Forest Service.
Montana DOR: That might be a possible data syndicate.
Montana DOR: consider as well.
Montana DOR: Do you have any thoughts? Or do you guys? Do you have your hand raised?
Gordy Sanders: Yeah, I just had a, maybe, additional item,
Gordy Sanders: I'm just curious if the department is…
Gordy Sanders: Pursuing any kind of legislative changes that, we need to be aware of, and then…
Gordy Sanders: I know there was a lawsuit…
Gordy Sanders: filed regarding the last session, and a bunch of the tax changes. You know, are there any ramifications that could possibly come out of that?
Gordy Sanders: That could affect the business of this committee.
Gordy Sanders: So whether you do that now, or just adding it to the agenda, just curious if there's other things going on
Gordy Sanders: In the background that we need to know about.
Montana DOR: Sure. So let's, let's book that before the discussion we have.
Montana DOR: about number 3, let's insert that between number 2 and number 3. Is that okay with the department? Just an update there.
Montana DOR: Does the department have any concerns or thoughts on Zone 4 at this point in time?
Montana DOR: I mean, I guess some things to potentially consider is there's any irrigated land on the ag site, there's a minimum valuation that property goes at. That might be a consideration that the committee would look at, is if this trend continues.
Montana DOR: Establishing some sort of minimum valuation for a forest property, that it can't be valued below that. Just for an equalization purpose.
Montana DOR: You look at Jared's… report, you'll see that
Montana DOR: Most of the regression is based off the 17 and 18 sales, so as you say.
Montana DOR: We stayed with the 10-year average.
Montana DOR: in two cycles from now, those are not going to be available, and we're down to one sale if current trends continue. So…
Montana DOR: your minimum…
Montana DOR: potentially having to extend from a 10-year Olympic average to a 20-year Olympic average, so you don't lose those data points, and the regression would maybe be something that could be…
Montana DOR: could consider.
Montana DOR: Or finding another resource for sales, like you were mentioning, I don't know if any…
Montana DOR: BLM sales, or what kind of access did… Yeah, we looked at the Forest Service sales back in 2022 and doing all this, and it might be worth looking at it again. Mostly, there just wasn't as many… as much detail about that stuff as the DNRC stuff, so when it came to the regression model, the DNRC numbers were better.
Montana DOR: And they also weren't really comparable, so we couldn't, like, combine the two data sets to make the regression, just because there, again, there just wasn't as much detail as far as service stuff.
Montana DOR: If there are some sales that could be used, though, it may be worth a conversation with them to try to get the additional data that are similar to the DNRC. It might be worth a reach out to them, if they can provide any additional information. You can look at it again, I'm sure.
Montana DOR: there is a… I mean, there's a lot of effort being put into body markers for Bondo spine, and it's very possible something could evolve in the next year or two that could change conditions out there. It might see, you know.
Montana DOR: Response and market activity up there that would justify
Montana DOR: We continue to consider those questions are rolling it out there.
Montana DOR: Senator Burness, do you have your hand up?
dave fern: Thank you. This is kind of on track, I hope, but I recently, within the last week, attended the regional MACO, which is the Montana Association of Counties meeting.
dave fern: Here in Kalispell.
dave fern: And, we had a presentation from DNRC.
dave fern: And I think they're working pretty well.
dave fern: To try to look at the problem with lack of mills.
dave fern: Trying to look at opportunities for, you know, value-added products and that sort of thing.
dave fern: So, I think that, you know, I would hope in the future
dave fern: We can expand some opportunities, and expand some products.
dave fern: Perhaps that would help the eastern region.
dave fern: I don't know, but… It seems that, you know, we're…
dave fern: We have a fairly dire situation with the…
dave fern: Travel expenses and meals available.
Montana DOR: So that's a good question.
Montana DOR: In the eastern zone.
Montana DOR: Does the BON… because the Forest Service doesn't have a lot of land out there, probably why you're not seeing a lot, say it.
Montana DOR: what BLM do they conduct for us? Yeah, I think that's what we're looking at, to see if there is another data set, possibly a BLM for sales that might be in Zone 4, too, so I think we're…
Montana DOR: We can help you with some of those contacts, Jared, if you need some help. I don't think we've actually looked at the DLM stuff. That would be another good option. Just to see what's available.
Montana DOR: In your discussion on the Zone 4 issue.
Montana DOR: So, since it's okay that we kind of punt on this issue for now. It seems like we have a reasonable data set to deal with 27
Montana DOR: Great ratio cycle, and then kind of monitor this as far as going ahead, and we do a little research on potential initial data sets, and that goes from there.
Montana DOR: Okay.
Montana DOR: All right, so now let's see if we can get an update on policy from the Department with respect to legislative changes.
Montana DOR: And, we'll share the one.
Montana DOR: Hello, everyone, sorry for being late, I was at a…
Montana DOR: Budget Office, project, but,
Montana DOR: stop, and then all for those online that may not know me, I'm the Deputy Director. First, just want to extend our
Montana DOR: And Director Beatty's greeting.
Montana DOR: can be with us today, and then also, our collective thanks for your service, each one of you. I know this is… this takes time and expense to come here and to… your time is worth something, even if you're online, and many of you are the same group that were part of making
Montana DOR: Dramatic changes for the better here a couple of years ago, and so this is… it's nice to see the…
Montana DOR: They follow through and see the,
Montana DOR: The fruit of those flavors, and that this is something that was
Montana DOR: A highly contentious effort. A couple of sessions ago, required a
Montana DOR: sort of a quick remedy bill, I think, to… to fix a problem, and then you guys begin meeting, and of course, our excellent staff here working on this, resolve this issue, so it's not as…
Montana DOR: it isn't the issue that it once was, and it's… I think it came to a place of balance and fairness, and so, thank you, and…
Montana DOR: As it relates to, the legislative session, Gordy, you were asking about that.
Montana DOR: You know, two sessions ago, as an agency, we had, I think, 55 bills.
Montana DOR: I recall. And many of those were red tape initiatives sort of bills, tries to reduce red tape.
Montana DOR: But last session, I think we had about 15 and…
Montana DOR: We haven't, finalized the number this time, but we're only around a dozen, and there's certainly
Montana DOR: from Director Beatty's perspective, and also from the Governor's Policy Shop, we're trying to keep these to, must-haves and not
Montana DOR: nice-to-haves in terms of legislative, bill requests from us.
Montana DOR: And I'll… I'll stand corrected, Paul, if you need… you or any of your staff. We don't have anything related to the Forest Land Initiative, or… or, at this point, in terms of, legislative changes, is that right?
Montana DOR: Yes, sir. Tax state.
Montana DOR: Yeah, definitely.
Montana DOR: We're not doing anything.
Montana DOR: In regards to what the land classification work
Montana DOR: group did in the interim with making changes to the ag land.
Montana DOR: So, there shouldn't really be anything that would impact rainfall risk, right?
Montana DOR: And then, that answers that, and then the other one, Dory, you asked about the…
Montana DOR: Just a general statement about there's… there is a…
Montana DOR: a lawsuit about… so the biggest property tax bill that passed was the Senate Bill 542
Montana DOR: Sometimes referred to as SLISH, House Bill 231. Most people refer to this as 542.
Montana DOR: It changed taxation.
Montana DOR: into a… into tiered rates. It was a two-pronged. There was a 25 and then a 26.
Montana DOR: Process in this… in a…
Montana DOR: In a general way, those bills, or that bill, when signed into law, Provided tax relief to
Montana DOR: two kinds of property. We have 16 classifications of property.
Montana DOR: Two classes,
Montana DOR: In a sense, one was primary residences, and the other one was long-term rentals, and those got…
Montana DOR: Preferred for, tax relief, and that had to do with
Montana DOR: the run-up of values, relative values to those types of properties compared to other classes of property over the prior few years since COVID. And so.
Montana DOR: In a local tax base.
Montana DOR: You've probably heard Brendan Bee talk about this, if you think about
Montana DOR: a tax base being a ball, and a collection of all of the total value of the local tax base made up of all the different classes and values of those classes. So, you've got residential, you've got
Montana DOR: Ag, you got forest land, you've got commercial, all of that into it represents the value of a bundle of local properties and their classification and values, and we certify that value to local governments the first Monday of August. So we're in the process, our part of that.
Montana DOR: is to appraise property and get it classified in the right class. That's what we did.
Montana DOR: So, we certify that value to local governments.
Montana DOR: And in the meantime, what's happening with the local governments right now is they're putting together the budgets. Every one of their departments is going through
Montana DOR: Deciding what they want to present, and then the commissioners eventually, decide what their budget is going to be, and there's some tech… there's some law, some statutory limits on how much they… what they can do with their budgets.
Montana DOR: At the end of the day, when we certify a value, then the local government knows
Montana DOR: What the value they levy One Meal will raise in terms of dollars.
Montana DOR: They divide one and the other, their, their budget into
Montana DOR: the value of a mill, and then decide how many mils they're going to levy. That's the way that from that, and that's how tax bills get made.
Montana DOR: So…
Montana DOR: There's 3 processes, or 3 pieces to do that. There's the appraisal, there's the tax rates, and the legislature sets tax rates.
Montana DOR: And the local government sets budgets, and they determine the actual tax bills.
Montana DOR: So, this 542 changed the tax rates.
Montana DOR: They gave preferential treatment, if you will, intentionally to lower the tax rate in the… accordingly, the tax bills on… for primary residences and long-term rentals.
Montana DOR: This fall, this… this budget remains… this tax base remains the same, so if you…
Montana DOR: Push in on one part of this and say, we want to reduce
Montana DOR: The tax, liability for one class or two classes of property push in over here, it pushes out somewhere else.
Montana DOR: So it shifts onto whatever else is there to shift onto, depending on the makeup of your local tax base. So that shifts onto
Montana DOR: Porcelain at times, ag at times, commercial at times. It depends on the makeup of that tax base, too.
Montana DOR: One example, sort of an extreme example, is residential.
Montana DOR: tax base in Missoula County is 80% of their tax base.
Montana DOR: Fallon County is 2% of their taxpense. So, you can see that when you make a… when you make a difference in benefiting, trying to benefit residential taxpayers.
Montana DOR: That impact is going to be quite different.
Montana DOR: when it's 80% of your tax base in Missoula versus over in Fallon County, it has a lot of pipelines. So, that's important to bear in mind when you're thinking about impacts
Montana DOR: Oh, okay.
Montana DOR: tax legislation. It's just a shifting around among the taxpayers.
Montana DOR: And in this case, the beneficiaries intentionally were primary homeowners and long-term rental properties, so…
Montana DOR: And I assume many or all of you signed up for your primary,
Montana DOR: House to get to a preferential tax rate, and maybe have some rental property to do that on.
Montana DOR: The lawsuit that Senator Hertz and others filed had to do with…
Montana DOR: The way that the law… that that bill was passed.
Montana DOR: And they're contending, they're suing, saying that
Montana DOR: The original title of that bill was,
Montana DOR: property taxation changes, but the sub… sort of the subtitle was Freezing Tax.
Montana DOR: In the process, as is those of you that have been around the legislative process a long time, this is not unusual, in my opinion.
Montana DOR: Where, you'll have a bill title that's a general bill title, and by the time that that bill becomes law, that bill has changed dramatically.
Montana DOR: God.
Montana DOR: When I was in the legislature, we used to talk about
Montana DOR: Jacking up a field title, and…
Montana DOR: putting a whole other bill… a whole other thing under. This is nothing new under the sun, but they are… they are suing for that under those premises, saying that the way that the original intention of that bill, the original title of that bill, didn't at all
Montana DOR: Reflect what it ended up getting passed.
Montana DOR: That's the substance of their lawsuit. So it's back and forth. There have been motions for… by both sides for summary judgment, and I have no idea
Montana DOR: When the…
Montana DOR: You know, if the court will grant either summary judgment, either in favor of a lawsuit, or to dismiss it.
Montana DOR: Or if they'll… or when that might happen. That was… wild, and
Montana DOR: Gallatin County District Court. It's a very busy court.
Montana DOR: I'm told that by attorneys that file actions over in that court that
Montana DOR: Sometimes it takes over a year for something to get.
Montana DOR: on your…
Montana DOR: document, so we don't… we don't have any idea about the timing of it, or what's gonna happen. So, I don't know, Dori, if that… that helps you
Montana DOR: Give an explanation of what that lawsuit is, and the status of it.
Montana DOR: Looks like you have… Or Senator Byrne has a question.
dave fern: I was just gonna say to the interested participants that…
dave fern: You know, I think that, you know, I'll probably put forward some revisions more modest.
dave fern: Because… In my estimation, it was such a big bill, that…
dave fern: I don't think it's necessarily the complete finished product.
dave fern: And there was maybe some unintended consequences, but more modest than maybe the
dave fern: Thoughts of folks behind, the lawsuit.
dave fern: And I did put in the chat that there is some… Tax liability reduction.
dave fern: for… A number of commercial entities starting this year.
dave fern: That would take in, take the average commercial value, and I think up to 6 times that value.
dave fern: The rate will go down a little bit from 1.89 to 1.5. I think, also.
dave fern: Part of the thought when we were trying to put this together was to also
dave fern: pay attention to the so-called mom-and-top businesses, you know, your small tech firms that make up a majority of Montana businesses in the state, and see
dave fern: If we could provide some assistance, so… That's what's going on.
Montana DOR: So, I think one thing to point out is the tax rate will get set, but that's not a Department of Revenue function, that's the legislative function, correct?
Montana DOR: We appraise property and get it into the right class.
Montana DOR: And our… and… and statute says that we appraise all property at 100% of margin fact.
Montana DOR: So that's our goal.
Montana DOR: We don't have a vested interest
Montana DOR: Property taxes go to local governments and schools, so there's no vested interest in the state.
Montana DOR: to say about… Weather taxes…
Montana DOR: There's not a conflict of interest built in about… we don't try to drive tax bills up or down or anything. We just… our goal is to get it guided to be fair.
Montana DOR: Great.
Montana DOR: Did you want to add to that? Well, yeah, one of the reasons I'm here.
Montana DOR: I thought there was something being planned to call it a recreation dance.
Montana DOR: Where if you had either Class 10 or maybe Class 3 for all in, that if you weren't…
Montana DOR: Actively pursuing either timber or an egg.
Montana DOR: They said that it was going to move to a recreation.
Montana DOR: category if you allowed people to, say, hunt or fish health. So, we'll talk about that a little bit. So, there's no department bills going down that one.
Montana DOR: Right? So, who knows what's being cooked up on there, right? And so, I think one of the… one of the discussions that did come up the last legislative session that kind of… the lead-in to Peter's topic is that
Montana DOR: You remember that on some agricultural properties, there's an attempt to essentially prove that
Montana DOR: Over and above what currently exists, that people are actually using those agriculturally taxed properties for agricultural production.
Montana DOR: It ended up in my memory, that that bill did not end up passing.
Montana DOR: But I don't think the issue is dead. It gets back to the point you're bringing up, is that there's this perception.
Montana DOR: that there's, you know, there's a lot of property in Montana that's owned
Montana DOR: By people that had no intention of using it for traditional uses, whether it be forest land, or agricultural land, grazing land, what have you, and that those folks are being undertaxed.
Montana DOR: Because the intent behind having these
Montana DOR: actively managed lands, taxed beneficially, that there's an economic return to the communities from the agricultural activities and the forest management activities that go on, and that maybe there's a disconnect going on there. So… so I don't think that that issue's going away. That perception is probably as strong now as ever, and so it's very likely that
Montana DOR: that you might see another attempt, you know, this next legislative session, to try to get after that point. So, I think that's what drove Dr. Gold to think more specifically about this issue with respect to Class 10 and small private forest landowners. Did he come up with a proposal that he
Montana DOR: through outpours lately last night, and I'm just gonna… gonna say that as a committee.
Montana DOR: Taking action on something like this that would require legislative action is outside of the scope of what our charter is?
Montana DOR: Nonetheless, I think it's worth having a discussion, you know, in the context of what our role is to look at valuations, especially when we have a zone that's being difficult to value based off traditional
Montana DOR: methodology. So unless anybody has any objections, I'd like to have this conversation.
Montana DOR: You're up with their schedule.
Montana DOR: Alright, Peter, I'll turn it over to you to let you explain what you said, I'll… Yesterday.
Peter Kolb: Okay, yeah, well, you know, thanks for indulging me on this, and the other added item to this is, of course, the DNRC wildfire Suppression Bill that was touted last legislative session this last year, amounting to $30 million, and who pays for that?
Peter Kolb: And the suggestion that private forest landowners should pay for that, because they're the primary beneficiaries from DNRC wildland firefighting.
Peter Kolb: Which I strongly disagree with, and I get offered testimony to that effect at a previous meeting. But…
Peter Kolb: I also was handed a concept bill, that is, to my knowledge, being prepared, by an outside source.
Peter Kolb: to propose a recreational land tax for landowners that are primarily using their land for recreational purposes and not for any kind of agricultural productivity. And some of that
Peter Kolb: I would guess stems from a trend that's happening where larger ranches are being bought in eastern, central, and western Montana by corporations and other entities, mainly as a recreational outlet.
Peter Kolb: And again, you know, similar types of issues have come up in the past.
Peter Kolb: Plus, there was a national survey of forest landowners done by Brett Butler out of the University of New Hampshire, that, also showed that 99% of forest landowners nationally
Peter Kolb: Own their land for recreation and wildlife, and timber production is way down on the list.
Peter Kolb: And our own surveys across Montana show a very similar trend, but again, that's very easy to misinterpret.
Peter Kolb: Because, from our stewardship program, where we had over 3,000 landowners go through it, and we surveyed them.
Peter Kolb: As well as other surveys we sent out to private landowners, recreation and wildlife are, primary reasons why they own their land.
Peter Kolb: But, to achieve their objectives, a vast majority of them, I would say more than 60%,
Peter Kolb: Use forest management as a methodology to maintain their goals and to maintain their conservation ideals for their property.
Peter Kolb: So, timber management is important as a tool to them, but it is not listed as the primary reason why they own that land.
Peter Kolb: Which can lead some people to interpret that as this land is not being used, or is not being taxed appropriately, because it is not being actively managed for
Peter Kolb: Timber production, or any kind of wood products, or forest production, you know, whether that's traditional or non-traditional.
Peter Kolb: And I saw on the agenda item also that, you know, there's this question about, do forest landowners need to show that they're active forest managers in order to qualify for a Class 10 designation?
Peter Kolb: And certainly some states, Wisconsin being one of those notable ones, requires a certified forest management plan to qualify for a lower timber tax.
Peter Kolb: So… and then there's other models. Our neighboring state, Idaho, has two options for… two options for forest landowners. One is a timber yield tax, where when you do sell stumpage or logs to a mill, a percentage of that is taxed at a higher rate, to compensate for the lower land tax.
Peter Kolb: And the other is a yield tax, which is very similar to ours, though they have, though they have on their, on that tax a caveat
Peter Kolb: That if you change that land use, say from timber to residential or subdivision.
Peter Kolb: You have to pay a significant back tax that basically makes up for that land not being taxed as a truck land tax.
Peter Kolb: Okay, and that's to discourage speculators buying up large tracts of land with the purpose of developing it, and having the tax benefit of forest management, even though they have no intention of managing it for productive, sustainable forest management.
Peter Kolb: So, just some other models from other states.
Peter Kolb: So, of course, in Montana, the issue has come up in almost every legislative session the last 3-4 times, at least to my attention.
Peter Kolb: that, you know, forest… there are forest landowners that are using Class 10 as what they would call a tax shelter. They have no intention of managing their land for productivity, or forest productivity, or anything like that, and
Peter Kolb: So, the neighbor who owns, 10 acres is paying a much higher tax rate in the form of track plant tax than the person who has 20 acres next to them.
Peter Kolb: So those are discussions of inequity. So thinking about this, and working with a lot of landowners, and look at the issue of both fire suppression costs and things like that.
Peter Kolb: I just…
Peter Kolb: kind of threw out a concept that what if… what if there was a Class 11, a Forest Conservation Property Tax.
Peter Kolb: That would cover lands that were not productive… that were forested, but do not fall under the productivity requirements.
Peter Kolb: Or do not have the species, such as you may have a forested landscape that's dominated by aspen. Aspen is not a commercial, wood product species.
Peter Kolb: And so right now, that may be, classified as non-qualified ag land, as an example, which is still a pretty, pretty low tax.
Peter Kolb: So, to address this question about forest management plans and intentions, how do we, in… as…
Peter Kolb: Least painful a manner as possible, so requiring the least amount of personnel changes and classifying changes.
Peter Kolb: How would we address this issue? And my brainstorming thought process was to create what would be called a forest conservation property tax, where landowners own
Peter Kolb: land that I would classify as woodland, where woodland is not necessarily commercial species, but it's dominated by woody vegetation. That would be shrubs or non-commercial species, and
Peter Kolb: for parts of Montana, that…
Peter Kolb: Could well be mainly Ponderosa pine forest that does not ever produce any kind of a product that is usable.
Peter Kolb: And that tax rate, would be a little different than Class 10. It would still be assessed like Class 10 is, based on its productivity potential.
Peter Kolb: But, that… that potential might be used, as a multiplication factor for, what that land is being used for in order to provide a tax basis for counties and schools, etc.
Peter Kolb: To remain productive, especially in counties where a lot of land is being taken out of production and just being held for recreational purposes.
Peter Kolb: So it was just a thought process, and included in that would be that if you do have your land in a conservation property tax category.
Peter Kolb: You could convert it to Class 10 if you have a certified forest management plan, or you have a record of timber sales off of it, which can be found through hazard reduction agreements through the DNRC.
Peter Kolb: And likewise.
Peter Kolb: To address the wildfire issue, I think it's pretty clear, at least in what I have looked at, that landowners that are actively managing their forests or shrub lands
Peter Kolb: with fire hazard mitigation as an objective, are really benefiting DNRC's ability to suppress wildfires.
Peter Kolb: Whereas those who are not are, of course, adding to the cost base for suppression of those lands. And so, a certified management plan, would also offer that benefit, whereas a landowner who is doing nothing to, mitigate fire, fuels or anything like that.
Peter Kolb: Would pay a slightly higher share of tax basis in order to compensate those additional costs dealing with fire suppression.
Peter Kolb: So it's just a way of addressing all sorts of issues that have come up in the last decade or so, in the least painful manner, requiring the least amount of changes in our current tax structure and our ability to assess, tax fees. And that's what this
Peter Kolb: It's basically a thought paper, to address those issues.
Peter Kolb: And I've thrown those out to various interest groups, including the Board of the Montana Forest Owners Association.
Peter Kolb: And I've got interest, I've got, you know, everybody's… nobody wants to see taxes increased, that's, you know, that's not a good thing. Nobody wants to propose that, but I've gotten some positive feedback on this notion, at least, and I just thought I'd throw it out there to this group.
Peter Kolb: To get a reaction and see what you think, if this is a potential mechanism to help the state move forward in addressing multiple issues.
Montana DOR: Thank you, Peter. Senator Kerna, I see you have your hand up.
dave fern: Thank you.
dave fern: Perhaps this could be what we call a study bill?
dave fern: So, this is when, this is a bill that would pass through the legislature.
dave fern: Both, both bodies.
dave fern: And, if passed.
dave fern: It is ranked high enough, it would really obligate the proper committee to really take a deep dive on it.
dave fern: And if it's working well, then,
dave fern: The committee would actually have a bill, a number of bills, as committee bills.
dave fern: It works best, like, when you have unanimous support for it.
dave fern: I'm just throwing it out there, as a process.
dave fern: To learn more about it. But, you know, my initial… Feel on this is that
dave fern: If Idaho and Wisconsin are doing something different, to meet.
dave fern: The trend of, recreational Land, and what you've pointed out.
dave fern: Perhaps it's… it's a good idea that we,
dave fern: Be a little bit better equipped for the times.
Montana DOR: I'm kind of curious on, if we did something like this, you have a management plan, receipts, or hazard management. Who's the oversight of that? Who's… do I give either my plan to you, or to you?
Montana DOR: I don't know where that would happen. What level?
Montana DOR: Yeah, I think there's a lot of… a lot of details that have to be worked out. I think it's… I think it's worth the discussion, because I… I think this issue is not going to go away. One of the challenges that we… that we have seen is that with…
Montana DOR: Timberland, we don't have that ability to meet an annual income threshold. That is not a reality for us, and so… so what would be an appropriate, proxy for that? As Peter said, some… some states, they require, you know, a certified management plan, certified by whom?
Montana DOR: there's a lot of details there. Proof of receipts, I mean, sometimes, you know, it's a little bit difficult, but then how long of a period? So, I think it's… it's worth some time and effort to think about.
Peter Kolb: Because…
Montana DOR: when you're in a legislative section, this stuff happens pretty quickly sometimes, and then you don't always have the opportunity to have the best thought train around that, so I appreciate
Montana DOR: Peter, you're bringing this up, and at the same point, I'm just going to point out that I think the recreational land classification
Montana DOR: Might expand beyond just
Montana DOR: a Class 10 type thing. I mean, there might be a similar concept that's explored for ag grazing lands, too, especially on the smaller end of the… of the ownership range. I think as we saw the last time around, there were some thresholds in there that if you got above 640 acres of ag, then those standards, the same standards didn't apply.
Montana DOR: Yeah, I think I just… I do want to point out that
Montana DOR: Peter, your comments about timber, not being, you know, a primary goal for private forest landowners.
Montana DOR: those, those results were from small private forest landowners that didn't necessarily include what we in Montana would consider industrial forest landowners, but we still have a fair amount of timberland that falls within that category, you know, very upwards of…
Montana DOR: a million acres left in Montana that are owned by, you know.
Montana DOR: commercial investors that are managing four timber.
Montana DOR: for purposes, so… Gordia, so you have your hand up?
Gordy Sanders: Yeah, just a comment, and then thanks, Peter, for bringing that idea to the table, and Paul, you're right.
Gordy Sanders: Over time, you know, these issues are not going to go away, so it's time to kind of think about
Gordy Sanders: How we can move forward.
Gordy Sanders: Just a comment, I mean, your conservation…
Gordy Sanders: land tax. I would disagree with the word conservation.
Gordy Sanders: Because that's going to confuse issues with conservation easements, Which are entirely different.
Gordy Sanders: And most of those are… For working forest lands.
Gordy Sanders: So… Title it Recreation or something, and…
Gordy Sanders: And maybe, Senator Fern is correct, Maybe it…
Gordy Sanders: There needs to be some kind of a study bill And maybe the department can think about…
Gordy Sanders: How they would… Suggest some new classification that might help kind of resolve some of these issues.
Gordy Sanders: I think that would be beneficial also.
Montana DOR: Thanks, Courtney, I agree. Semantics do matter, and I think if you call it recreation, too, that can be problematic as well. So, a lot to think about.
Montana DOR: But, I just want to clarify one of the things in the area where you wrote, like, our… the current process.
Montana DOR: He… it stated that the non-cartial tree species, you know, such as freaking aspens, that we assess that as Class 3 non-qualified egg, and that he feels that it should be only applied to something that's been a 20. So when we're doing… dealing in forest land.
Montana DOR: If it's less than 20, anything that's deemed non-commercial is valued in track land, not
Montana DOR: non-qualified egg. It has to be a minimum of 20 acres before it reaches the non-qualified egg classification.
Montana DOR: So I just wanted to make that clarification in here.
Montana DOR: So.
Peter Kolb: If I may respond to that, so I'm in Missoula County, I own 20 acres.
Peter Kolb: One acre is deducted because my home is on it.
Peter Kolb: Of the remaining 19 acres, 16 are classified as Class 10, and the Missoula County Assessor has classified 3 of those acres as non-qualified ag land.
Peter Kolb: Because I have basically a big aspen grove, and… and they don't…
Peter Kolb: seem to think the stocking rate is correct, or would make it as Class 10. Now, I personally disagree with that, but I have… it's not been worth me fighting, but I've been a little puzzled because it is, classified as non-qualified egg land.
Montana DOR: Okay, so maybe I just misunderstood how you had it written on here. So yes, you… anything that does not qualify as commercial
Montana DOR: timber, as Aspen Trees is one of the listed that we do not consider commercial.
Montana DOR: And we don't consider it commercial because of the quantity and quality necessary
Montana DOR: in the state of Montana to make it commercial, commercial. So, your Aspen, because you are 20 acres, is then, yes, that portion is…
Montana DOR: Classified as non-qualified ag land.
Montana DOR: And I apologize if I misunderstood, the way I read it was you were stating 15 acres, anything that doesn't qualify would then fall under non-qualified. But that's only for 20 acres to less than 160.
Peter Kolb: Right.
Montana DOR: Yeah, you know, there's a lot of details in here, like, that would have to get worked through, right? You know, one of the things, Peter, I did notice, you know, I understand your proposal to try to include… to direct some of the tax revenue towards
Montana DOR: the education, the portion of the education, I'm not sure that that's something that we can do through
Montana DOR: The tax policy, or if that's maybe something we have to look at through another avenue to do that, but it's sort of towards some exploration.
Montana DOR: I just don't know that the department or the legislature can direct
Montana DOR: a portion of that to a specific use. Maybe Senator Turner can answer that.
dave fern: I would say that it probably complicates things, that,
dave fern: You know, since property taxes are and will continue to be a… A contentious issue.
dave fern: appropriately appraising And having a tax rate,
dave fern: that meets… that meets what the actual use is, is a real positive thing. Just a couple of things.
dave fern: I'm certainly happy to work with Peter, or any of you.
dave fern: I'm putting together a study bill, if that's the direction you'd like to go down the road on.
dave fern: And as a legislator, we're allowed to have, like, a partner in it, you know? So it can be, like, a threesome or whatever to work with a…
dave fern: a bill writer to try to put it together and try to get… you know, it's like, whereas, whereas, whereas, you know, let… you know, let the legislature do a study on this. So I think that that's something, Peter, you can
dave fern: You can think about it, and the rest of the committee.
dave fern: but the study bill process is pretty good.
dave fern: And if there's a lot of what-ifs, it may not be a… a bad way to go down, a road to go down, so,
dave fern: Certainly, I would.
dave fern: It would help in any way.
dave fern: possible, and I think it's kind of a nonpartisan-type approach, really.
dave fern: This is not new. We've been…
dave fern: Talking about this in the legislature, and it's pretty apparent that, you know, there's
dave fern: Wide swaths of land that are…
dave fern: You know, whether it's corporate-owned or whatever, that's… that's a little bit different than what we're used to, and we want to make sure that… that there's equity in the property taxes, and that, yeah, the counties and the cities and schools get their
dave fern: get their fair share and help take some of the burden off of some of the other taxpayers. That's a… that's a big deal in this.
Montana DOR: So, I have a question surrounding this as well. So, currently.
Montana DOR: there is no application process for forests or anything like that. If the tree species meet the board feet requirement, then it's automatically forest. And I know that some of you are representing small forest properties, and others are representing large forest properties, but how would we as an agency know
Montana DOR: Especially on the smaller forest properties, which ones are truly… timber…
Montana DOR: and which ones are recreational, just by looking at an ownership, or without having an application process. Is there any kind of a place that they…
Montana DOR: have to register… I mean, is there anything that we could use for that, or is it… would it just have to be an application process? That's a really good question. You'd have to figure that out. A couple things come to mind. One would be
Montana DOR: the DNRC could somehow certify a property as having a management plan, that'd be a new role for them, versus nobody with the DNRC in the office. Or you could go the application route, where they had to provide
Montana DOR: Department of Revenue a copy of their forest management plan that's been signed off. I mean, there's a couple different ways to do that. And who…
Montana DOR: Who signs off on forest management plans currently? Has anyone? Montana Tree Farm.
Montana DOR: And in order to be a member of that, you have a management edge.
Montana DOR: Well, there's a lot… there's a stewardship… Peter, go ahead.
Peter Kolb: Well, a forest stewardship program has been in place for over 35 years. We don't use the term certification because that complicates that term. We use the term verification, but landowners go through a, inventory and planning process and a site visit.
Peter Kolb: And to date, we have almost 4,000 landowners have gone through the program, have a verified stewardship plan on cumulatively 1.4 million acres of forested land in Montana.
Peter Kolb: It wouldn't be that difficult, to use that as a roster. Wisconsin uses the tree farm program. If you're certified through a third-party tree farm program, you qualify for a timber tax. If you're not, you don't qualify. So there are…
Peter Kolb: there are venues. The tree farm program in Montana, doesn't have the personnel, probably, to take on that task, because in Wisconsin, every county has a forester, and that's not, of course, not the case in Montana, so you have to look at the reality of
Peter Kolb: Who can do it and what entities, but we do have some entities in place
Peter Kolb: that would be playing that role, along with the service foresters of the DNRC, etc. And again, if you come up with this, different tax classification, and I just threw out there, I mean, so timber tax is pretty low per acre.
Peter Kolb: By all standards. If you say… if you went with a different classification, like, you know, whether it's recreational or conservation.
Peter Kolb: And you use the same valuation as you do with timber tax, but you just say for people that aren't actively managing the forest, you just double that tax.
Peter Kolb: There's over 55,000 forest parcels, there's over 28,000 forest landowners in Montana.
Peter Kolb: Probably two-thirds of them, are not active managers or anything like that, so that would generate a significant amount of revenue that could, again.
Peter Kolb: not understanding all… you'd have to modify how a tax revenue is used, but that could fund additional DNRC service foresters, that could fund an educational program, like the stewardship program.
Peter Kolb: that… the federal funding from that has pretty much disappeared, so that program might go away, and it's been very valuable for Montana. So that's… that's potentially how this would, work together.
Montana DOR: And then the Montana Tree Farm, we have…
Montana DOR: inspect it periodically to make sure that you are following that plan, and that you have done anything to preserve it. That's right. Are there other states that have models that work? Idaho has the environment for a
Montana DOR: forest management plan, they have qualifications, all that kind of stuff. I'm sure it's possible.
Montana DOR: We have a situation in Sanders County where it was old timberland, and it was passed on to a company that has since transferred it to the state of Montana as recreation property.
Montana DOR: Where… what does the county do about the income that was coming off of that? How does that get recovered? The county? I mean, our expenses are the same, they haven't changed. Yeah, that's a policy question.
Montana DOR: That's what Scott was explaining, and you alluded to. Just because your stoppage values decrease doesn't mean your property taxes are going down. Right.
Montana DOR: In essence, the local governments just levy more mills to collect the same amount of revenue, so it just gets spread to all the other taxpayers.
Montana DOR: Interesting topic. I would encourage, you know, this group is maybe a commuter to share ideas on this.
Montana DOR: You know, shared discussion with Senator Byrne, if you have your hand up again.
dave fern: One last thing, perhaps, Peter, you'd want to think of not having a new tax classification. That's kind of a touchy issue, because we kind of lead the nation in a number of classifications, but maybe something more like what we do with Class 4.
dave fern: We have residential, and then we have a multiplier.
dave fern: That gets you to a business, and so it might be a multiplier under Class 4 under Class 10, and then you're thinking about if this is a situation that's multiplied times whatever.
dave fern: But I think it's really… I think you bring up some really…
dave fern: really good points, and it's, as I say, it's probably worth…
dave fern: You can see all the questions coming out of your proposal, so it's, it's, it's worth, it's worth keeping,
dave fern: Keeping going with it, I think.
Peter Kolb: And sir, your feedback is invaluable because, you know, you're in the business of legislating, I'm not, so I'm way out of my wheelhouse, if you will. And that's why I wanted just to present this as a thought process, and not as anything more than that.
Montana DOR: I just wanted to go back to, like, what Robin had mentioned with the application process. So, in the agricultural world.
Montana DOR: We have an agricultural…
Montana DOR: ag application that those producers must provide proof of that bonfire ag operation. So that kind of goes back to sometime, what, 10 years ago, we did have a forest application.
Montana DOR: Or longer than 10 years, maybe 16 years ago.
Montana DOR: But it…
Montana DOR: If you chose to go the application route, I've provided proof, just like a bona fiber ag operator would.
Montana DOR: If you want a more of a bona fide forest manager, they would show the group regarding the
Montana DOR: that would be one avenue to… to maybe resolve some of what Peter's concerns are with the true forcers versus non-true forecers. Well, I think that's the issue that kind of came up, is this idea of having performance criteria to qualify for the preferential tax.
Montana DOR: You know, and so I think… I think going down that road within Class 10, you know, under a certain acreage threshold, maybe there's a different performance criteria.
Montana DOR: that could include things like fruits of income, or a forest management plan, or what have you. I think… I think that's just the reality that we're probably going to see coming down the line as
Montana DOR: Whether it be next legislative session, or one going ahead, so…
Montana DOR: hoping that there was a different avenue for us to be able to retrieve that information as opposed to the application process, because then there's fiscal notes assigned to that, and if there's application process, there's FTE assigned to that, then sometimes…
Montana DOR: aren't the legislator's favorite to documents either, and so if there was a different way to get the information to apply it, that would certainly help the fiscal note as well. Back to Senator Byrne's comment, maybe a study bill on… on performance criteria, maybe… maybe it's a little broader than just Class 10.
Montana DOR: Maybe that's… there's more appetite to look at it on a broader scale, and that might score a little bit better from the… from the intercom standpoint, too, so it might be… But I do think it's a good point to maybe include agricultural in Studyville, because they have similar concerns.
Montana DOR: Sorry, baby.
Montana DOR: In Powell County, we recently reviewed a conservation easement.
Montana DOR: On… A section and a quarter.
Montana DOR: And… Vital Ground was gonna be the holder.
Montana DOR: And their mission is to protect the prison that are heaven and death.
Montana DOR: And this easement prohibited in perpuity
Montana DOR: Any commercial harvest or grazing.
Montana DOR: How does Zelle?
Montana DOR: I think that's exactly on the line of what we're talking about. I, you know, as we have more of those.
Montana DOR: coming down the line, there's a lot of issues, right? You have the landowner that just chooses not to, then you have things like this, which becomes a deed restriction that prohibits it. If there is a deed restriction regarding that, they don't, they're not assigned a…
Montana DOR: forest classification. If it's strictly prohibited from being… Commercially.
Montana DOR: timber?
Montana DOR: they're not… they don't… But how would you know that, right? I mean, the Department of Revenue would never… unless somebody voluntarily brought it up, or… Right, we get conservation easement documentation, generally. You guys do? Okay. Generally, we do, because we have… we actually…
Montana DOR: note that and follow those, so we know what properties do have them. I do see more on the ag side than I do the forest side.
Montana DOR: But, yeah, generally, we do receive that documentation.
Montana DOR: This buffer is probably 60% timber, 60% grazing ground.
Montana DOR: Right. It depends on how many acres, so if they're over the 160 acres, then you're talking, even though they may not qualify for timber classification, they're automatically qualifying for the ag classification if they're over 160 acres.
Montana DOR: So, it really depends on what… how the conservation easement's written.
Montana DOR: There's a lot of those issues that would be maybe best addressed through a video study bill, because who knows what else could come up that we aren't even thinking about today.
Montana DOR: Excuse me.
Montana DOR: Any other discussion or comments on this topic?
Montana DOR: Didn't eligible to get the order.
Montana DOR: So, boom.
Montana DOR: I just didn't.
Montana DOR: remember touching on item 2 under your group discussion, or EDER. Thanks for pointing that out. Yeah, so EBR log cost study.
Montana DOR: Did you guys look at that, or… are you looking at us for information on that, or are you… It was your topic. Oh, what?
Montana DOR: Yeah, it was to draw attention that there is a new blog and trust study available through BBDR, so I don't know if you'd incorporate that into your model assessment, Jared, or not, but it might be worthwhile because you seem to
Montana DOR: I just, with everything else, like, destitute would escalate, so,
Montana DOR: Thanks for reminding me to put that on there.
Montana DOR: You can't have a lot of time into having to step into a meeting, that doesn't work for me, so…
Montana DOR: But yeah, that's available through the VBR website. They do that every 2 years. They rotate between log and haul rates and logging rates.
Montana DOR: From what I understand, they got a much higher response rate in the logging survey this time around, so the data should be… have some value, so…
Montana DOR: Alrighty. The general public comment?
Montana DOR: John Baucus has attended a few of these meetings, and
Montana DOR: He… he has considerable timberland, and he's… Doesn't feel like…
Montana DOR: It meets the qualifications of contractivity. Do you agree with that?
Montana DOR: His comments before.
Montana DOR: Well, I mean, technically, based off of the…
Montana DOR: Process we have in place, the models that are in place.
Montana DOR: Does, and so it just goes up to him to petition.
Montana DOR: you know, the Department for a different classification, if he has data to support that.
Montana DOR: is… If it… if it… if he can prove that.
Montana DOR: Could it be taxed as grazing land, if it's part of this rent? Well, that's the reality, is that if he goes in and he helps
Montana DOR: its actual value is likely increase, not go down. And so, you know… And as our personal receipts.
Montana DOR: Generally, it looks like our horse lab is taxed about 70 cents an acre, and grazing lab, more like 40.
Montana DOR: But it… and it's valued differently. Grazing land is valued differently than forest land. So if you looked at
Montana DOR: two of the same 15 acres side-by-side, one in grazing, one in forest, the value of forest is going to be substantially higher than the value of grazing, but your tax rate on forest is less than 1%, where grazing is 2.05%, so it kind of, like.
Montana DOR: Almost balances each other out, where actually forced is more beneficial.
Montana DOR: Yeah. Yeah.
Montana DOR: Anybody else?
Montana DOR: Do we need any voted recommendations from this committee?
Montana DOR: Not unless they have something specific as far as valuation methodology, averaging periods, capitalization rate. We've kind of beat that horse in the past.
Montana DOR: I guess, you know, if it's helpful, we could… we could have a resolution that is… this kind of validated the work that you did on evaluation.
Montana DOR: I'm sure that probably just… maybe a motion that committee recommends no changes to the…
Montana DOR: Okay. Stumpage calculation and evaluation methodology, four zones. Alright, I'd be open to a motion along those lines if somebody were willing to do so.
Montana DOR: Gordy?
Gordy Sanders: So moved.
Gordy Sanders: There wouldn't be any changes.
Montana DOR: If you have a second?
Montana DOR: I'm second. Nancy's gonna second that. So the motion is essentially to ratify the work done by the department with respect to valuation and cost analysis.
Montana DOR: The 2027 cycle.
Montana DOR: Any further discussion?
Montana DOR: Anybody oppose this motion?
Montana DOR: Alright, we'll pass it.
Montana DOR: I guess the last thing is, you know, law requires this committee meet once annually, so we've met that requirement.
Montana DOR: probably no need to meet again this year. I don't… unless, I don't see any reason for the committee to reconvene, unless there's somebody that feels differently.
Montana DOR: The communications on the subject of performance could continue outside of the scope of the direct committee action, but interests of members that
Montana DOR: have an interest in that, you can get in touch with Dr. Gold directly and let him know that you're interested. Senator Fern?
dave fern: Oh, thank you. It would be helpful, maybe, to Peter.
dave fern: Maybe myself.
dave fern: If you go around and say, would you be interested in
dave fern: Pursuit of some sort of study bill.
dave fern: I mean, it could be a bill made if Peter felt confident
dave fern: But it sounds like there needs to be a lot of collaboration on this. So, you know,
dave fern: do people want to see this pursued? Not anything to do with this committee so much, but just…
dave fern: As something that would be beneficial
dave fern: Baby to the industry, into, fair taxation.
Montana DOR: Sure, I mean, what's the committee members' general interest? Is there interests of folks?
Montana DOR: that, that want to work with Peter and Senator Byrd, potentially, on this issue of exploring performance standards for the various
Montana DOR: Traditional use classifications they have.
Montana DOR: Bullet.
Montana DOR: Gordy's raising his hand, so he's in… he's the chair of the committee.
Gordy Sanders: Oh, I think everybody in the committee has volunteered to do it.
Montana DOR: We've got Gordon.
Gordy Sanders: Oh, I'd be glad to…
Montana DOR: Yeah, I'd be like…
Gordy Sanders: a comment.
Gordy Sanders: Paul, in terms of our need to move or meet again, Yo.
Gordy Sanders: It kind of depends on what level of activity there is. Some things could change or pop up, or there may be a need in the department.
Gordy Sanders: Can just visit with you, Paul, about, you know, any need that we… if there's a need for us to meet again.
Montana DOR: Yeah.
Montana DOR: We could certainly call immediately what you did, so… Yeah, again…
Montana DOR: The one change that was made was that this committee has to be once annually. So, usually this year, leading up to reappraisal, we do this. It's going to be next year, the off year, where we don't have updated data to present.
Montana DOR: But we might have some… Maybe a recap of any potential legislation that would impact forest land. So with that in mind, is this…
Montana DOR: late May, early June next year. I would encourage us to wait towards the end… to the end of the session, and then see if there's something happening in the session for next year.
Montana DOR: Word.
Montana DOR: the other… What else was gonna be ordered?
Montana DOR: Alright, I will ordain the motion to adheren.
Montana DOR: Thank you, everybody. Yeah. Alright, thank you. Thank you, everybody on the… For the call, too.
Montana DOR: Thank you.
Montana DOR: Curious of this topic of performance…