16th June 2020
...continued from Part One
nvestors jumped at the opportunity to own timber, and existing companies like Weyerhaeuser restructured to take advantage of the tax breaks. The longtime Seattle-based timber company converted into a real estate investment trust in 2010.
Timber investment companies, a rarity in the 1990s, now control a share of the forestland in western Oregon roughly the size of Delaware and Rhode Island combined.
Weyerhaeuser, the largest of such companies, has more than doubled its size in western Oregon over the past 15 years, the investigation by the three news organizations found. The company owns more than 1.5 million of western Oregon’s 6.5 million acres of private forestland.
Despite its growth, Weyerhaeuser employs fewer people than it did two decades ago and has shed most of its mill operations. It has three wood products facilities in Oregon and directly employs about 950 people, fewer than a quarter of the 4,000 employees the company listed in a 2006 news release. The decrease stems from factors that include consolidation and automation of jobs in mills.
Just outside of Falls City, Weyerhaeuser owns roughly 21,000 acres. The company controls the road into the forest that leads to public lands and the land surrounding the creeks that supply the town’s drinking water. In 2006, the city temporarily shut down its water treatment plant because it was clogged with muddy runoff from logging operations.
Weyerhaeuser spokesman Karl Wirsing said the company remains a good partner to local communities. In the past five years, the company has donated nearly $1.6 million across the state, including $10,000 to the Falls City Fire Department and $16,000 to the Polk County sheriff to help fund a new position that also patrols private forestlands.
“We don’t simply do business in Oregon; our people have been living and working across the state since 1902, and we are proud of our role supporting local communities and economies,” Wirsing said in an emailed statement.
But not all communities describe the relationship as a beneficial partnership.
Corthell, the city manager in Falls City, said it took him nearly two years of phone calls and emails before Weyerhaeuser responded to his requests for help.
The stretch of road between the forest and the town is cracked like a jigsaw puzzle.
Corthell had hoped that the timber companies that use the road every day could pitch in to help pay for the $200,000 in needed repairs. But he said he didn’t get a meeting with them until after he suggested the road might close if it weren’t repaired.
At that meeting in March, representatives for Weyerhaeuser and a few other timber companies told Corthell that they were willing to provide matching funds if the town could secure a state grant. In response to questions about Weyerhaeuser’s delay in returning Corthell’s emails and calls, Wirsing said the company had previously been willing to contribute to the road project but the town never asked for a specific dollar amount.
Corthell is now preparing the town’s grant application. If the funding doesn’t come through, he doesn’t know where he’ll find the money.
PENELOPE KACZMAREK, 65, spent her childhood smelling freshly cut wood at the family mill and the sulfury wafts of the distant pulp mill through her kitchen window in the coastal fishing town of Newport more than an hour southwest of Falls City.
She watched floating logs await their turn at her father’s saw blade, mesmerized as men in hickory shirts, sawn-off jeans and hard hats rolled them across the water.
Kaczmarek’s father, W. Stan Ouderkirk, was a logger, small mill owner and Republican member of the Oregon House of Representatives in the 1960s and 1970s. He represented Lincoln County, home to the Siuslaw National Forest and a vibrant commercial fishing port.
When a large, out-of-state corporation bought his mill in the mid-1970s, Ouderkirk told his daughter that a rise of corporate ownership and loss of local control would lead to worse outcomes for Oregon’s forests and the people who depended on them.
“I fear my father was right,” Kaczmarek said.
Lincoln County lost an estimated $108 million in timber payments after the federal government restricted logging on public lands. But the sharp drop in federal forestland revenue is only partly to blame for budget cuts that have led some counties to force-release inmates from jail or reduce sheriffs patrols to the point that 911 calls for break-ins and assaults went unanswered.
Tax cuts for large timber companies that log on private lands cost the county an estimated $122 million over the same period.
Before lawmakers began chipping away at the tax through multiple measures, Lincoln County collected an average of $7.5 million a year in severance taxes. Last year, the county received just under $25,000.
Now a psychiatric social worker, Kaczmarek sees people with mental illnesses filling local jails because the county doesn’t have the money to provide adequate health services. In therapy sessions, teachers tell her about overcrowded classrooms and school programs cut to the bare minimum. County leaders blame the majority of the financial struggles on the decline in revenue from logging.
To avoid crushing cuts in services, communities that already struggle with high poverty and unemployment rates have had to raise taxes on residents and small businesses, said Jaime McGovern, an economist with the state’s Legislative Revenue Office.
“If they don’t get approved, then there’s no money there,” McGovern said. “And so, you’ve seen libraries closing, police stations closing.”
In the Marcola School District, about 15 miles northeast of Eugene, the elementary school was so dilapidated that voters in 2015 passed a bond to build a new one.
The additional funding helped, but it wasn’t enough. The new elementary school is already bursting with students.
“That hits home because I volunteer at the school district and I care about my taxes,” Helen Kennedy, a retired attorney, said. “I care about the kids.”
Kennedy, who lives on 3.5 acres in the district, saw her property taxes increase by more than 20% after she voted for the bond. Last year, Kennedy paid $1,443 in property taxes, or about $412 per acre. That’s a fraction of what she’d pay in a city like Portland, but nearly 100 times the rate of the district’s biggest landowner.
Weyerhaeuser, which owns more than 49,000 acres in the district, paid about $226,000 in property taxes last year, according to county records. That amounts to about $4.60 per acre. At the rate Kennedy’s land is taxed, the company would have had to pay an additional $20 million.
“Holy cannoli,” Kennedy, 64, said about the losses from timber tax cuts. “The old adage that ‘what is good for the timber industry is good for Oregon’ is no longer true.”
HANS RADTKE knew the loss for counties was coming.
Radtke, a member of a gubernatorial task force on timber taxes, sat in a hotel conference room near the state capitol in 1999 listening to lobbyists and timber executives argue that their industry was being unfairly taxed.
In the early 1990s, as Oregon voters passed reforms to limit their property taxes, large timber companies successfully lobbied to gradually cut the severance tax in half, lowering their own bills by $30 million a year.
But now they wanted to completely eliminate the severance tax.
Timber companies argued that since they’d already cut nearly all of the existing forests on their land, and state law required them to plant new trees, they were essentially farmers. And since Oregon didn’t tax crops, it shouldn’t tax trees.
As the owner of 100 acres of forestland, Radtke could have personally benefited from the tax cut. But as an economist advising Kitzhaber, the governor at the time, he knew it would devastate rural communities.
After several failed attempts to offer changes that would lower industry taxes but avoid eliminating the severance tax altogether, Radtke knew the cut would pass. He turned to the industry lobbyist sitting next to him and said, “You’re fucking us.”
“And he just smiled,” Radtke said.
The task force dissolved without advancing any recommendations. Months later, Lane Shetterly, a former Republican state representative whose district included Falls City, introduced a bill at the request of the timber industry to phase out the severance tax.
The bill contained an increase in forestland property taxes that many believed would lessen the impact of the cut.
The Association of Oregon Counties supported it. The school lobby didn’t fight it. The governor signed it.
Shetterly, now president of the Oregon Environmental Council, one of the state’s top environmental groups, remembers almost nothing about the bill.
“Yeah, man that’s a long time ago,” Shetterly said in a phone interview.
Kitzhaber, who vetoed an earlier version before ultimately approving the measure, also doesn’t recall his support of the tax cut.
“I don’t question that I did,” Kitzhaber said, “but I can’t remember the context.”
Two decades later, Oregonians are still picking up the tab.
If Oregon hadn’t phased out its severance tax, timber production in 2018 would have generated an estimated $130 million.
The state would have received an estimated $59 million under California’s tax system and $91 million under Washington’s system, the investigation by OPB, The Oregonian/OregonLive and ProPublica found.
Unlike Oregon, those states still tax large timber companies for the value of the trees they log.
Timber companies continue to pay state taxes that apply to all Oregon businesses, including income taxes and lowered property taxes, kept far below market value as an incentive for residents to own forestland.
The companies also pay a flat fee on the volume of logs they harvest. That fee, set in part by a board of timber company representatives, generates about $14 million annually. It funds state forestry agencies and university research instead of local governments.
Linc Cannon, former director of taxation for the Oregon Forest & Industries Council, defends the elimination of the severance tax.
In many cases, Cannon said, counties didn’t lose as much money because they simply shifted the tax burden to residents and small businesses.
Cannon said timber is a crop and should be treated like one. States that tax timber differently are simply wrong, he said.
“If you don’t believe timber is a crop, then you can tax it in other ways like Washington does,” Cannon said.
A WISP OF SMOKE from a burning pile of logging debris swirled into the fog drift above the jagged hills behind Falls City, home to some of the nation’s most productive timberlands.
At each bend in the rocky logging road, Jerry Franklin’s voice rose. Oregon has become a case study for what can happen when state leaders fail to regulate the logging style practiced by investment companies, said Franklin, who is one of the Pacific Northwest’s best-known forest scientists.
“This is not stewardship,” Franklin said, pointing to clear-cuts down to skinny stumps, sprayed over with herbicides, dessicated brown plants and streams without a single tree along the banks. “This is exploitation.”
Franklin doesn’t object to logging. He and Norm Johnson, another forest scientist with whom he works closely, have drawn the ire of environmental groups for supporting more logging on federal lands, including certain types of clear-cutting.
But this, Franklin said, is different.
Douglas fir trees, which can live for centuries, are cut after only about 40 years, resulting in lower-quality wood that is worth less. The shorter timetable forces cutting across more acres to produce the same volume, but fewer workers to log and process the wood.
At 83, Franklin is older than most of the Douglas firs now growing in Oregon.
...continued in Part Three