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State of
DEPARTMENT
OF NATURAL RESOURCES |
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JENNIFER M. GRANHOLM governor |
REBECCA A. HUMPHRIES director |
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State of
DEPARTMENT
OF NATURAL RESOURCES |
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JENNIFER M. GRANHOLM governor |
REBECCA A. HUMPHRIES director |
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BILL NUMBER: |
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TOPIC: |
Earmark
percentage of revenue for an endowment account from sale of certain forest land
by school districts |
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SPONSOR: |
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CO-SPONSORS: |
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COMMITTEE: |
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Analysis
Done: |
POSITION
The Department of Natural Resources (DNR) opposes this
legislation.
PROBLEM/BACKGROUND
The original PA 217 of 1931 was enacted to provide for
the establishment of municipal (county, township, city, village, or school
district) forests, including the acquisition of state lands by municipalities
to be managed for forestry purposes. It
provided specific guidance as to how such lands were to be managed on a long-term
basis and provided for the reversion of the lands back to the state when the
lands were no longer used for forestry purposes. Approximately 75,000 acres of state land were
deeded to municipalities throughout the state under this act. Most of these lands were deeded prior to 1960
and were actively managed as forests for many years by the municipalities. PA 217 was incorporated into PA 451 of 1994
with little change from the original act, and the language remained the same
until 2004.
In 2004, the DNR opposed the original introduced
version of HB 5313 which would have removed reverter language from all property
deeded to municipalities and schools for forestry purposes. The bill was amended to address some of the
DNR's concerns, but still provided for the removal of the reverter language from
deeded properties which were not "prime lands" as defined in the
subsequently approved legislation, PA 377 of 2004. To clarify the intent and correct language in
the 2004 act, it was subsequently amended by PA 179 of 2006. In addition to making corrections to the 2004 act
language, PA 179 also weakened the definition of “prime lands” and allowed the state’s
reverter interest to be removed from municipal forest lands that are “not
prime.” The DNR was neutral on PA 179
because the Departments of Management and Budget and Treasury were anticipating
some short-term revenues for the General Fund from the proceeds of land
sales. The amount going to state funds
is 50 percent of the proceeds when the released forest land is sold by the
municipality under the current law.
This newly introduced 2009 legislation will further
weaken and dilute the protections afforded to municipal forests under the prime
lands criteria by providing a further financial incentive to school districts
to dispose of their school forest lands.
The 50 - 50 split of sale proceeds between the school district and the state
will become a 90 - 10 split in favor of the school district.
DESCRIPTION OF
The bill will amend the Municipal Forest part of 1994
PA 451, Section 52706 (4) (MCL 324.52706) which currently reads in part: “If the conveyance is to a public agency or
any other person for fair market value, the public agency conveying the
property shall have an accounting taken, shall retain 50 percent of the
proceeds, and shall submit the remaining 50 percent of the proceeds to the
department of treasury for deposit as follows…" The amendment will change the 50 percent of
the proceeds to 90 percent to be retained for a school district and provide
that the school district put the money into an endowment fund.
SUMMARY OF ARGUMENTS
Pro
Con
The bill will provide for even more municipal forest
lands to be converted to other non-forest uses than the 2006 amendment provided
for, because of the additional financial incentive to school districts. The intent of the original Community Forest
Act, PA 217 of 1931, will be further diluted. The General Fund will be deprived
of revenue.
FISCAL/ECONOMIC
IMPACT
Are there revenue or
budgetary implications in the bill to the --
Budgetary:
Additional applications to remove reverters will
result in the expenditure of staff time which is unfunded.
Revenue:
None
Comments:
There are no funds provided to the Department to
administer this program.
Budgetary:
This legislation will result in a reduction in
revenue to the General Fund.
Revenue:
HB 4561 will bring about an 80 percent reduction in
revenue for school district properties sold.
Comments:
This bill will generate additional unfunded cost to
the state to review with an associated large reduction in revenue.
Comments:
HB 4561 will increase revenues to a few school
districts if they sell municipal forest property. However, school districts and other
municipalities that choose to sell their municipal forest land will forgo the
opportunity for long-term revenues from sustainable forest management
activities. These might equal or exceed
the interest they might earn from a long-term fund which they will be obligated
to establish under the proposed bill.
OTHER STATE DEPARTMENTS
The
Departments of Treasury and Management and Budget should have concerns because
of some negative revenue implications.
ANY OTHER PERTINENT INFORMATION
None
ADMINISTRATIVE
RULES IMPACT
Rules are not necessary to administer this part of
the NREPA.
_______________________________
Rebecca A. Humphries
Director
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Date
FMFM
