Tree growth taps into town tax questions

Are Maine's laws that provide a special real estate tax category for tree growth a necessary component that provides jobs, taxable income and economic prosperity? Or are they a "beggar‑thy‑neighbor" loophole that allows a few landowners to deflect their share of property tax to others? The answer depends on who is asked.
Two bills are working their way through the legislature that attempt to clarify this question. LD 1470 was submitted by Maine Senate President Kevin Raye and is co‑sponsored by Rep. David Burns of Whiting; it aims to deny tree growth classification to those "using the land as a property tax shelter without harvesting." The other, LD 1138, is backed by legislators primarily from the western part of the state and is intended to "prevent unnecessary expulsion of landowners" from the tree growth designation. The second of the two bills prompted an angry letter from Lubec Select Board Chairman William Daye, who termed it an "unfunded mandate" because it would pass the responsibility of certain record-keeping obligations to local tax authorities, increasing the burden on already overworked staff.
Burns -- who says he has 100 acres listed in tree growth -- does not agree with Daye on that point. In a recent interview he said he would probably vote for LD 1138, because "it puts teeth in the law."
Raye's bill has received an "ought to pass as amended" recommendation by a majority of the Taxation Committee, with the amendment providing for random sampling, by the director of the Bureau of Forestry, of land enrolled in the tree growth program and of the forest management and harvest plans. LD 1138 also received an "ought to pass as amended" recommendation.
According to information provided by Lubec Tax Assessor Jim Clark and published in the town's annual report for 2010B2011, a "typical" property owner with a $100,000 assessment was billed $1,865 in taxes. That bill would have been $108.32 lower if land within the town classified as "open space" had been taxed instead at fair market value. According to Clark, another approximately $80 went to subsidize tree growth lands. Open space and tree growth have separate objectives, but both reduce taxes in exchange for a landowner's commitment to specified usages. It is Clark's job to explain these reductions to unhappy taxpayers who ask why their taxes increase each year.
Clark estimates that Lubec lost $164,000 in revenue to lands designated as tree growth and received reimbursement from the state totaling $11,047. In 2011, there were 52 tree growth properties in Lubec, totaling 3,331 acres, and another 34 properties designated open space, with 2,222 acres. Land under the two designations accounts for nearly 23% of Lubec's 24,500 total acres. Other tax‑reduced designations include farmland (123 acres) and working waterfront (less than 1 acre).
Within municipal boundaries, Lubec has 93 miles of shoreline. This makes the town attractive to real estate investors who can take advantage of the tree growth designation to increase their profits, confident that compliance with their commitment to harvesting is difficult to monitor, according to Clark.
According to the Small Woodland Owners Association of Maine (SWOAM), "There are more than 120,000 small woodland owners in Maine, people who own between 10 and 1,000 acres of forest land. These landowners own more than 5.5 million acres, or 33% of Maine's woodlands. Each year Maine's small woodland owners generate more than 40% of the wood that is used in Maine's forest products industries." The organization's website states, "SWOAM supports tree growth and open space as alternatives to ad valorem [based on fair market value] taxation. These programs are essential to control sprawl, to maintain the working rural economy, to protect wildlife and plant habitats and to help ensure the continued existence of private lands that can be available to the public."
When the law, dubbed "The Chase Amendment," was passed in 1953 it was intended "to encourage by maintenance of adequate incentive the operation of all forest land on a sustained basis by their owners, and to establish and maintain uniformity in methods of assessment for the purposes taxation according to the productivity of the land." The Maine Forest Service interprets that to mean, "Forest land enrolled in the program is valued on the basis of its ability to grow trees rather than its 'highest and best use.'" Maine Revenue Services adds, "The land must be used primarily for the growth of trees to be harvested for commercial use."
Lots as small as 10 acres can be enrolled in tree growth, which provides a bigger tax break than land enrolled in open space. To qualify landowners must prepare a detailed plan under the supervision of a registered forester and update it every 10 years. Failure to update the plan could result in loss of tree growth designation and the application of a significant penalty: repayment of some or all of the unpaid taxes.
Land included in the tree growth category is appraised at a rate provided by Maine Revenue Services. The current rate in Washington County is $118 per acre for softwood and $105 per acre for hardwood, regardless of where that land is located.
In Lubec a 10‑acre oceanfront lot may have a fair market value of $300,000. If that land were to be designated tree growth, the taxable value would be $1,180. At Lubec's current tax rate of 19.5 mills, the landowner would receive a bill of $23.01, while their neighbor, assuming they have a similar lot but appraised at fair market value, would pay $5,850. The difference will be made up by other taxpayers.
Whether or not the land enrolled in the tree growth program is actually being used in a manner consistent with "the productivity of the land" is a question that can only be answered on a case‑case basis. Certainly, large timber operations could not survive if their land were taxed at residential rates, but those companies typically operate in sparsely settled areas where schools and other social services are not provided.
Further information about the status of LD 1470 and LD 1138 is available on the Maine Legislature website, <www.mainelegislature.org>.