Crown Pacific Seeks Tax Cut Citing Economic Obsolescence, Timber Company Takes Kootenai County To Court
Citing high log prices, low finished lumber prices and a lack of federal timber, Crown Pacific is going to court to fight for a 75 percent reduction in its Kootenai County property taxes.
If Crown Pacific wins, the assessed valuation of its Kootenai County properties will drop from $16 million to $3.8 million. That would mean a tax bill drop from $210,000 a year to about $50,000 a year, according to the Kootenai County Assessor’s office.
Similar suits are expected to go to court in Bonner and Boundary counties, where the company also has sawmills and similar arguments as to why it’s paying too much in property taxes.
Crown Pacific isn’t commenting on specific elements of the case because it is in litigation. A trial begins Sept. 3.
Generally the company argues that county assessors aren’t considering how economically obsolete its plants in Coeur d’Alene, Colburn, Albeni Falls and Bonners Ferry have become. Albeni Falls was recently closed for that very reason.
“The basic logic is we simply think there have been enough changes in the market that the mills are not worth what the assessors think they are,” said Fletcher Chamberlin, spokesman for the timber company.
Selling prices for finished lumber are improving, but raw material prices have bounded even higher, Chamberlin said. “That reduces the ultimate value of the business.”
Gregory Cade, appraisal supervisor for Kootenai County, agrees there are market factors such as timber supply that need to be considered. “The extent to which they need to be considered is a key issue,” he said.
“What is the extent of economic obsolescence that this operating facility is suffering considering that it is operating at 100 percent of capacity and has been over the years?” Cade said.
On the other hand, Cade expects he will be discussing a lower 1996 assessment with Louisiana-Pacific Corp. for its Chilco sawmill. But that mill was closed for the first six months of this year because of a lack of sawlogs, he said. “But it’s different when you have a mill operating at 50 percent of capacity,” Cade said.
Crown Pacific argues that one of the key components causing the economic obsolescence is the reduction in timber sold from U.S. Forest Service land.
But the Idaho Panhandle National Forests, one of the primary sources of federal timber for Crown’s three remaining North Idaho mills, hasn’t been able to sell all of the trees it put on the auction block since 1991. In fact, 58 million board feet of timber haven’t sold.
Both Crown Pacific and the Forest Service say that unsold timber doesn’t necessarily mean the industry is awash in trees.
The Panhandle Forests are offering 80 million board feet of timber for sale this year versus 202 million in 1991, Chamberlin said. “Never mind what is sold…what’s being offered is dropping like a rock,” he said.
And what’s not selling may be priced too high or too difficult to harvest. Mill closures, Chamberlin added, “are based on how much timber is offered for sale and what’s expected to be offered for sale.”
Dave Faulkner, timber sale coordinator for the Panhandle Forests, says there are many more restrictions on how timber is harvested than there were 15 years ago and that may keep buyers away. For example, logging may be restricted to a certain time of year to protect an endangered species or allow snowmobilers to use trails without interference.
“It’s not as though they are awash in timber,” Faulkner said.
The tax dispute also centers over how much Crown Pacific said it paid for each individual mill when it purchased seven sawmills and more than 200,000 acres of timberland in Idaho, Washington and Montana from DAW and W-I timber companies in 1993. Crown Pacific puts the value much lower than the assessors.
“If you take their price and carry it down to large warehouse buildings, you have buildings purchased for less than $2 a square foot,” said Cary Vogel, senior deputy assessor in Bonner County. “You can’t even put down paving for $2 a square foot.”
Similar disputes are arising in other counties and in other states. Bennett Lumber Co. is suing Latah County over the 1995 assessment of it’s Princeton mill that puts the value of the plant, land and equipment at $9.2 million.
Oregon has been giving sawmill owners steady breaks because of economic obsolescence every year since 1992. It looks at five factors in deciding how much in property taxes a sawmill owner pays. Those factors include:
The reduction in federal log supplies because of the listing of the spotted owl as endangered.
The increasing use of substitutes for lumber and plywood in the building industry, from chip board to steel studs.
Increased competition from Canadian lumber, which Oregon contends is subsidized by the Canadian government.
Increased competition from the southern United States because of lower production costs.
Reduced demand for lumber due to other factors.
In 1992, this meant sawmill operators got a 20 percent break, said Cary Greenwood of the Oregon Department of Revenue. This year it will be 30 percent.
Kootenai County’s Cade acknowledges things like the spotted owl hurt western Oregon mills. Inland Northwest mills “haven’t been impacted to that extent,” he said.
Timber industry officials say that even if the spotted owl hasn’t reduced harvest in this area, it has increased the price of logs. That’s because owl restrictions reduced the supply other places and has sent buyers hunting for timber over here.
True, Cade said, “but the price of lumber has kept pace.”
The final answer will come in September, when Judge Gary Haman hears nine days of arguments over the tax question. Whatever the answer, “the decision could have pretty sweeping ramifications,” Cade said.
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