Lumber Companies Want A Big Cut - In Taxes Claim Changing Timber Supply Means Mills Not As Valuable

The concept isn’t new, but this year alone, it could cost Kootenai County nearly $500,000 in lost tax revenue.

It’s called “economic obsolescence,” a much-debated term that refers to equipment or materials that no longer are valuable because of changing technology. It’s used when figuring property values for tax purposes.

Its relevance here will be debated in court this fall in a case that could change the way the wood products industry is taxed in Idaho.

For the second year in a row, Crown Pacific Inland Lumber is appealing its property assessment by claiming that logging cutbacks on federal land have sent the plant’s market value plummeting.

“Eighty to 90 percent of logs used to come from public lands; now it’s about 10 percent,” said Stephen Olson, a tax valuation expert with Consilium Inc., a Bellevue, Wash.-based company that is leading the charge.

As a result, he said, mills have to compete with cheaper imported logs or buy higher-priced private timber - economic obsolescence.

“It’s caused real atrophy,” he said. “Half the industry has disappeared.”

Last year that claim fell on deaf ears. County commissioners refused to drop the company’s property assessment from $13.5 million to $3.5 million.

“There’s certainly evidence that that’s true on the West Coast and there certainly have been some mill closures around here,” said Deputy Assessor Mike McDowell.

For three years, for example, Oregon has conducted an economic survey of its wood industry. Last year, they lopped sawmill tax assessments by 25 percent. The rationale: The northern spotted owl controversy limited logging and reduced the industry’s profitability.

“But there’s some real question about whether that lack of availability has had the same impact on local mills,” McDowell said.

Crown Pacific has appealed the decision in a case that will be heard in District Court in October. If a judge agrees with Crown, the county’s seven other mills are expected to follow suit.

Already this year, Louisiana Pacific’s Chilco mill has made the same argument. The company claims its mill and surrounding assets are worth $16.5 million. The county assessed it at $22.8 million.

Numbers are even further apart with Crown. This year, the mill was valued at $15.4 million, while company representatives said it should be $4.3 million.

Combined, the difference between the county and the two logging companies on property values amounts to $27.1 million in assessments.

With county tax levy rates hovering between 1.6 and 1.75 percent, that amounts to $475,000.

“It will be the very center issue at appeal,” McDowell said.

“If resolved in their favor it could have a considerable impact on” the county’s tax base.

, DataTimes