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17th June 2020
EDITORS NOTE: This article sounds much like what has occurred in Gold River!

Big Money Bought the Forests. Small Logging Communities Are Paying the Price.

Tony Schick, OPB, Rob Davis, The Oregonian, and Lylla Younes, ProPublica
June 11, 2020

This article was produced in partnership with OPB and The Oregonian/OregonLive. OPB is a member of the ProPublica Local Reporting Network.
ProPublica is a nonprofit newsroom that investigates abuses of power.

FALLS CITY, ORE. — A few hundred feet past this Oregon timber town, a curtain of Douglas fir trees opens to an expanse of skinny stumps.

The hillside has been clear-cut, with thousands of trees leveled at once. Around the bend is another clear-cut nearly twice its size, then another, patches of desert brown carved into the forest for miles.

Logging is booming around Falls City, a town of about 1,000 residents in the Oregon Coast Range. More trees are cut in the county today than decades ago when a sawmill hummed on Main Street and timber workers and their families filled the now-closed cafes, grocery stores and shops selling home appliances, sporting goods and feed for livestock.

But the jobs and services have dried up, and the town is going broke. The library closed two years ago. And as many as half of the families in Falls City live on weekly food deliveries from the Mountain Gospel Fellowship.

“You’re left still with these companies that have reaped these benefits, but those small cities that have supported them over the years are left in the dust,” Mac Corthell, the city manager, said.

For decades, politicians, suit-and-tie timber executives and caulk-booted tree fallers alike have blamed the federal government and urban environmental advocates for kneecapping the state’s most important industry.

Timber sales plummeted in the 1990s after the federal government dramatically reduced logging in national forests in response to protests and lawsuits to protect the northern spotted owl under the Endangered Species Act and other conservation laws. The drop left thousands of Oregonians without jobs, and counties lost hundreds of millions of dollars in annual revenue.

But the singularly focused narrative, the only one most Oregonians know, masked another devastating shift for towns like Falls City.

Wall Street real estate trusts and investment funds began gaining control over the state’s private forestlands. They profited at the expense of rural communities by logging more aggressively with fewer environmental protections than in neighboring states, while reaping the benefits of timber tax cuts that have cost counties at least $3 billion in the past three decades, an investigation by OPB, The Oregonian/OregonLive and ProPublica found.

Half of the 18 counties in Oregon’s timber-dominant region lost more money from tax cuts on private forests than from the reduction of logging on federal lands, the investigation shows.

Private timber owners used to pay what was known as a severance tax, which was based on the value of the trees they logged. But the tax, which helped fund schools and local governments, was eliminated for all but the smallest timber owners, who can choose to pay it as a means to further reduce annual property taxes.

The total value of timber logged on private lands since 1991 is approximately $67 billion when adjusted for inflation, according to an analysis of data from Oregon’s Department of Forestry. If the state’s severance tax had not been phased out, companies would have paid an estimated $3 billion during the same period. Instead, cities and counties collected less than a third of that amount, or roughly $871 million.

Polk County, home to Falls City, has lost approximately $29 million in revenue from timber sales on federal land. By comparison, the elimination of the severance tax and lower property taxes for private timber companies have cost the county at least $100 million.

“You have that tension between this industry that still employs people, but we’re losing some of the benefits of that relationship,” Falls City Mayor Jeremy Gordon said. “As those jobs diminish, there’s less and less support to subsidize that industry in the community.”

OREGON’S CONNECTION to the timber industry is so tightly knit that casinos, high school mascots and coffee roasters take their names from mills, loggers and stumps. The state Capitol is domed by a golden pioneer carrying an ax, and its House chamber carpeting is adorned with trees. The mascot of the Portland Timbers, a Major League Soccer team, is a logger who revs a chainsaw and cuts a round off a Douglas fir tree after every home goal.

While the industry today still rakes in billions of dollars annually, it’s starkly different from the one that helped build and enrich the state.

Oregon lowered taxes and maintained weaker environmental protections on private forestlands than neighboring states in exchange for jobs and economic investment from the timber industry.

Despite such concessions, the country’s top lumber-producing state has fewer forest-sector jobs per acre and collects a smaller share of logging profits than Washington or California.

If Oregon taxed timber owners the same as its neighbors, which are also top lumber producers with many of the same companies, it would generate tens of millions of dollars more for local governments.

Timber once employed 1 in every 10 working Oregonians and pumped over $120 million per year into schools and county governments through severance and property taxes. Now, it employs 1 in every 50 working residents and pays about $25 million in severance and property taxes that go directly back to communities.

The profits are concentrated with a small number of companies controlled by real estate trusts, investment funds and wealthy timber families. Small timber owners, who grow forests that are older and more biologically diverse than what corporate owners manage, have sold off hundreds of thousands of acres.

In western Oregon, at least 40% of private forestlands are now owned by investment companies that maximize profits by purchasing large swaths of forestland, cutting trees on a more rapid cycle than decades ago, exporting additional timber overseas instead of using local workers to mill them and then selling the properties after they’ve been logged.

Such intensive timber farming contributes to global warming because younger trees don’t store carbon dioxide as well as older ones. It also relies heavily on the use of herbicides and fertilizers, magnifies drought conditions and degrades habitat for wildlife such as threatened salmon and native songbirds.

Jerry Anderson, region manager for Hancock Forest Management, one of the largest timber investment companies in Oregon, said local leadership makes decisions about the best practices for the land despite responsibilities to investors.

“There’s nobody from outside this area that has come in and told us what to do on these individual plantations. Those are local decisions,” said Anderson, who has been managing land in Polk County under various companies for the past 40 years. The last eight years have been with Hancock. “I think our decision-making is very measured.”

In investor materials, Hancock, which belongs to the publicly traded, $25 billion Canadian Manulife Financial, says that it is well-equipped for the shift from managing natural forests to plantations of trees designed to grow as fast and as straight as possible, like arrows jutting out from the ground.

From a distance, tree plantations can be confused for natural forests. Oregon vistas still boast hundreds of thousands of acres of green treetops. But, on the ground, plantations of trees crammed together are often eerily barren, devoid of lush vegetation and wildlife.

Former Oregon Gov. John Kitzhaber said that he and his advisers were alarmed by the shift toward investor-driven forestry during his last of three terms in office. By then, forest ecologists, the U.S. Forest Service and even a former chief investment officer for Hancock had published papers warning that investor-driven forestry was ecologically damaging and less capable of sustaining rural communities.

“They have a completely different business model,” Kitzhaber, a Democrat, said.

Kitzhaber, who received nearly $200,000 in contributions from timber-connected donors while in office, supported multiple industry-backed measures during his tenure. He led a plan to save Oregon’s salmon that relied on voluntary measures from timber companies instead of regulations, and he signed into law a massive tax cut for the industry that’s still felt in many counties.

“The current state isn’t working,” Kitzhaber said in an interview. It may benefit investors, he said, “but it’s not working for small mill owners. It’s not working for rural communities. They don’t have any control of their future.”

FROM HIS FAVORITE SPOT on a hill near Falls City, Ed Friedow can see what he refers to as the big picture: the Oregon coast, rolling hills, a national forest and industrial lands now managed mostly by timber investment companies.

Friedow, a logger who grew up on a farm outside of town, watched as smaller timber companies from his childhood closed in the aftermath of the spotted owl protections, leaving control of the industry with larger companies that were more equipped to scale production.

“All of a sudden, it was just like a takeover situation,” Friedow said.

At the same time the changes were happening in Oregon, the timber industry was emerging from a nationwide recession that caused widespread bankruptcies in the 1980s. Many debt-laden companies began selling off forestlands. Meanwhile, changes in the federal tax code made timber an attractive investment that wouldn’t crash with the stock market.

Under federal tax law, pension funds and other investors can acquire forestlands without paying the corporate taxes incurred by traditional timber companies that mill their own products. Those corporate taxes have reached 35%. Investors in the company instead pay a capital gains tax closer to 15%.

In the 1990s, as federal logging plummeted, timber prices skyrocketed, making those investments look even smarter, said Brooks Mendell, president of the forest investment consultancy Forisk.

“Overnight, private landowners had something that became more valuable,” Mendell said.

...continued in Part Two