DNR Letterhead

BILL ANALYSIS

BILL NUMBER: SB 1102/HB 5734, as Introduced

TOPIC: Bills to repeal the commercial forest property tax adjustment.

SPONSOR: Senator Robert L. Emerson

CO-SPONSORS: None

COMMITTEE: Appropriations/Agriculture and Resource Management

Analysis Done: April 1, 2004

POSITION

The Department supports these bills.

PROBLEM/BACKGROUND

The Department issues annual payments in lieu of taxes to counties at the rate of $1.20 per acre for Commercial Forests. There are approximately 2,300,000 acres enrolled in the Commercial Forest program. MCL 324.51107 requires that the annual specific tax and State payment for commercial forests be adjusted in 2004 and every tenth year thereafter by a ratio that is computed as the state equalized value (SEV) per acre of timber cutover lands in Michigan in 1990 vs. the SEV per acre of timber cutover lands in 2004 and every tenth year after. Unlike the taxable value, the SEV is not capped to the Consumer Price Index. Some estimates have put this increase as high as 500 percent. Not only would the State pay this higher tax, but the landowner would, as well. This would pose a serious fiscal problem for the State in Fiscal Year 2005.

DESCRIPTION OF BILL

These bills would remove the commercial forest property tax adjustment scheduled for 2004 and all future adjustments. It would freeze Commercial Forest tax payments at a rate of $1.10 per acre for individual landowners and $1.20 per acre for the State.

SUMMARY OF ARGUMENTS

Pro

There are serious future financial implications to the State based on current law. These

bills would alleviate the potential financial implications that landowners and the State would face if the adjustment goes into effect as scheduled. These bills would also reduce the potential strain on the General Fund, which is used for these payments. Local units of government would not receive less revenue than they do currently.

Con

Local units of government would not receive an increase in revenue as they would under current law.

FISCAL/ECONOMIC IMPACT

Are there revenue or budgetary implications in the bill to the --

(a) Department

Budgetary:

If these bills are not passed, the Department would require a large increase in General Fund.

Revenue:

This legislation would not impact the Department’s revenues.

Comments:

None.

(b) State

Budgetary:

These bills would require up to a 500 percent increase in General Fund over current levels. That could translate into as much as a $13,000,000 increase.

Revenue:

The legislation would have no impact on the State’s revenues.

Comments:

None.

(c) Local Government

Comments:

The legislation would not affect current levels of funding to local governments. It would, however, freeze future payments at the current level, rather than letting the payments increase dramatically.

OTHER STATE DEPARTMENTS

There are no other State departments that should have a concern or issue with these bills.

ANY OTHER PERTINENT INFORMATION

None.

ADMINISTRATIVE RULES IMPACT

None.

_______________________________

Rebecca A. Humphries

Director

_______________________________

Date

BSS