WORK SESSION HB 3633  

 

TAPE 239 AB, 240 A, 240a A

 

HOUSE REVENUE COMMITTEE

AUGUST 7, 2003   8:30 AM   STATE CAPITOL BUILDING

 

Members Present:                        Representative Lane Shetterly, Chair

                                                Representative Wayne Scott, Vice Chair

                                                Representative Joanne Verger, Vice Chair

                                                Representative Phil Barnhart

                                                Representative Vicki Berger

                                                Representative Pat Farr

                                                Representative Mark Hass

                                                Representative Elaine Hopson

                                                Representative Max Williams                                               

 

Witnesses Present:                        Tom Tuchmann, U.S. Forest Capital

                                                Scott Cooper, Crook County Judge

                                                John Shelk, Ochoco Lumber Company

                                                Scott Shickli, Orrick, Herrington and Sutcliffe

                                                Hasina Squires, Special Districts Association of Oregon

                                                Michelle Deister, League of Oregon Cities

                                                Ray Wilkeson, Oregon Forest Industries Council, (OFIC)

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Richard Yates, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 240, SIDE A

 

004

Chair Shetterly

Calls meeting to order at 8:35 a.m.

 

OPENED WORK SESSION HB 3633

 

010

Yates

Provided background and description of HB 3633, “Staff Measure Summary HB 3633”, (Exhibit 1), provided -4 amendments (Exhibit 2) and “Revenue Impact Statement HB 3633”, (Exhibit 3).

 

028

Rep. Verger

How can the municipalities decide the land within their boundaries is subject to taxation, when municipalities are not taxed?  Also, this board can’t levy taxes?

 

030

Yates

The -4 amendment says the municipality can decide whether the authority will pay taxes.  The authority itself cannot levy a tax.

 

041

Rep. Barnhart

What is the definition of a municipality?

 

042

Yates

The bill defines municipality as a city or county.

 

050

Tom Tuchmann

A municipality that creates the forest authority is the decision maker on whether the forest authority is taxed or not.  

 

058

Scott Cooper

Spoke in support of HB 3633.  Paraphrased written testimony (Exhibit 4).

 

145

John Shelk

Discussed two sawmills in Prineville that could return to operation employing 200 as a result of this bill. The bill would assist 3 lumber companies that have lands up for sale.  Some of lands are being partitioned off into 160 acre parcels, taking away from traditional forestry use and is a concern to the forestry industry that has relied on federal resources and now has to rely on private lands for resource of lumber.  Spoke of gap coupled with timber land for sale without prospect of a timber buyer keeping the land in the same use.  These bonds do not obligate a municipality to buy the lands, it enables them to hold the lands in their current use, allowing lands to rest and then come back into full production. Land then can be managed on a sustained basis. Looking for a mechanism that ensures future timber supply.

 

211

Rep. Verger

Are you limited to not being able to sell this back? 

 

222

Scott Shickli

Does not believe there is a restriction on party to whom it could sell or purposes after purchase, drafted to leave it to good sense of the governing board of a community forest authority.

 

233

Chair Shetterly

What does that do with the bond when authority wants to sell the property?

 

234

Shickli

It’s not a matter of the statute; it’s a matter of finance if revenue bonds are outstanding. Any bondholder purchasing a revenue bond would want to make certain that strings are attached to the assets so those assets cannot be sold out from under them. Sale of some or all of the assets securing debt service in the bonds can be used to set up a fund to pay the bond off.

 

246

Chair Shetterly

Bondholders wouldn’t necessarily run the risk of being paid off early and lose their investment expectation?

 

250

Tuchmann

It is like selling a house with a mortgage on it; the proceeds would be used to pay off debt and there would be a new owner.

 

253

Shickli

Typically with revenue bonds, the bondholders receive call protection for a number of years where the bond cannot be called. If sold during the non-call period a fund would be set up to continue paying debt service on the bond.

 

260

Rep. Barnhart

Questions and discussion regarding the rate of growth of ponderosa and Douglas Fir

 

274

Rep. Barnhart

The authority can do this and break even?

 

276

Tuchmann

Answered affirmatively. Based on feasibility analyses done in Washington, California and Oregon, qualifying each transaction is different, described process. HB 3633 allows a municipality to allow a forest authority to have the discussions.

 

290

Cooper

Have not penciled out, but would like flexibility to go forward, currently use revenue bonds on housing authority, hospital authorities, economic projects, said none of these authorities have had a negative outcome.

 

298

Rep. Barnhart

The secret is to get land at a low price, with a loan where debt is stretched out long enough to harvest.  Is that a reasonable summary?

 

308

Cooper

Answered affirmatively

 

310

Rep. Farr

Discussion regarding Douglas fir habitat vs. ponderosa and costs.

 

317

Rep. Berger

Have you thought through what it would mean for a municipality and its immediate needs, including catastrophic, vs. a private company.

 

 

TAPE 240, SIDE A

 

012

Cooper

The bill leaves the option to municipalities to determine the level of real and personal property taxation; they are not going to let anything go that might be a source of real property revenue. Regarding catastrophic fire prevention, 40% of Crook County lands are unprotected with default plans already in place, a few more acres is not going to make a difference.

 

028

Shelk

Nature of revenue bond, the cost of issuing the bond plus the payment stream can be tailored to a sustainable harvest. The option of zero coupon bonds that do not immediately have to be funded gives flexibility to purchase and manage this type of property.

 

031

Cooper

Local governments are under enormous pressure to do something to stem unemployment. His community’s work force is trained for hands on manufacturing. This bill provides a tool to take to town meetings to show that something is being done. Running out of options; looking for flexibility and answers.

 

048

Rep. Berger

Cautioned panel to be careful with financial plan, and avoid getting into hotter water due to the ground-breaking nature of the bill. Likes the concept.

 

054

Shelk

HB 3633 only authorizes activity, the project has to fly on its merits. It requires study, having foresters examine property and its marketability and planning for 30-40 years to coincide with revenue bond streams.

 

059

Rep. Berger

Concurred.

 

087

Rep. Farr

Regarding May 14 testimony, described HB 3633 as an exciting concept addressing environmental needs with sustainable harvests and fish buffers.

 

096

Chair Shetterly

The purpose of the bill is to enhance the productive use of forest land.  Are there risks the other way?  If a municipality buys a productive piece of forest land and puts it off limits. The revenue bond would have the requirement to be paid back.  When this land comes under ownership of a community forest authority, is there increased risk for litigation or other interests challenging harvest activities or plans?

 

087

Shelk

Discussed requirement for repayment of revenue bonds on the lands.  There has to be an economic component to any decision made on the property. A governing board brings together industry and environmentalists.

 

110

Cooper

Described a county advisory committee which was required to balance economic and conservation interests and has worked together effectively in the interest of forest health and species protection.

 

126

Rep. Verger

Concerned about forest fire risk from people buying land close to forest lands and zoning them residential.  Has that discussion taken place within the properties you are talking about?

 

135

Shelk

Discussed difficulties in forest interface issues outside of Bend parceled in 160 acre pieces, this legislation is meant to truncate that activity.

 

143

Rep. Verger

Concurred with that intent.

 

145

Rep. Barnhart

Commented on the need for educated moderates in the area of resource development and preservation.  See this as a useful tool for management of orphan lands and bringing people together in a new understanding of what should be done in forest management.

 

165

Cooper

There is a big core of moderates out there that are just as concerned about forests and recreational opportunities as they are about the economic side.

 

179

Rep. Verger

The -2s are not incorporated into the -4 amendments?

 

180

Rep. Shetterly

No, they stand by themselves.

 

181

 

Discussion regarding differences between -1 and -2 amendments; -4 includes the -3 amendments.

 

193

Yates

Asked counsel if there would be a problem in adopting -2 and -3 amendments.

 

194

Chair Shetterly

Or the -2 and the -4.

 

195

Yates

Answered affirmatively.

 

197

Chair Shetterly

Noted that the -3 and -4 amendments took care of the problem of one county buying land in another county.

 

203

Rep. Farr

I do not have the -3 amendments.

 

204

Rep. Shetterly

They are included in the -4 amendments.

 

210

Hasina Squires

Appreciate collaboration between business and local governments. Supported -4 amendments that allow cities, counties and special service districts to make property exemption optional.  A taxing district may elect to continue to impose property taxes within those zones; districts if not responding to notice would have foregone taxes.

 

229

Michele Deister

Interesting idea, have not had an opportunity to look at carefully, but appreciate that it is a local option. Concerned about how it would work to buy property outside of jurisdiction.

 

235

Chair Shetterly

Property cannot be purchased by another county and was taken care of in the -4 amendments.

 

238

Deister

Does not feel it would affect many incorporated cities.

 

246

Ray Wilkeson

OFIC does not have an official position on the bill, discussed briefly and did not anticipate it would be going forward.  Shelk has been a longstanding member of the timber community.  This is a land issue; 160 acres is not an economically viable piece of property. There are economic consequences if that was allowed to happen.

 

258

Wilkeson

If land is converted from forest use to another use environmental protections are lost. There is an environmental and economic benefit to keeping land in resource use.

 

267

Chair Shetterly

Amended comments regarding -4 amendments, it does allow for purchase of lands outside the jurisdiction of the municipality, but only with written consent of each municipality affected.

 

276

Tuchmann

We’re comfortable with the final amendment.

 

278

Rep. Williams

Discussed the changing nature of the economy, relayed personal experience growing up in Bend.  We are on a slide that isn’t going to restore us to the glory days of the timber industry, these small steps will allow communities to support themselves with a resource-based economy makes sense with the dwindling supply of timber.

 

285

Chair Shetterly

Discussion regarding how land would be managed under Forest Practices Act, (FPA), would it be helpful in the bill to incorporate an amendment that says the land would be managed in accordance with the FPA? Does that help underscore the commercial nature of the enterprise and the management purposes for this land to be used?

 

305

Shelk

If it helps the Legislature with the comfort level it is one thing.  It is absolutely implicit and explicit in the nature of this land that it will be managed under the FPA.  The issues Wilkeson mentioned will not come into play as long as it is managed for timber.

 

310

Tuchmann

Concurred.

 

312

Shelk

Regarding Rep. Williams comment on dwindling supply, there is not a dwindling supply of timber in Oregon. On many timber lands including national forests it is growing too thick, and is growing up and dying.

 

317

Rep. Williams

I should have said dwindling availability.

 

318

Shelk

Concurred.

 

322

Rep. Verger

Time is of an essence, does not believe the bill should be moved to the interim.  It is a good bill and should be passed.

 

327

Rep. Barnhart

Concurred, this will provide a tool that will be extremely valuable for counties and for planning purposes.  If it turns out the chair’s comments are well-placed, the Senate could add an amendment to the bill.

 

334

Chair Shetterly

Do you have a position on the amendment regarding the FPA?

 

335

Wilkeson

It would be appropriate for FPA to apply to those lands under these circumstances.

 

337

Chair Shetterly

By default there is no other standard that would apply.

 

338

Wilkeson

Felt it was not necessary to make it explicit.

 

340

Rep. Verger

MOTION:  MOVED ADOPTION OF THE –2 AMENDMENT INTO HB 3633.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REP. HASS EXCUSED.)

 

341

Rep. Verger

MOTION:  MOVED ADOPTION OF THE –4 AMENDMENT INTO HB 3633.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REP. HASS, EXCUSED.)

 

343

Rep. Verger

MOTION:  MOVED HB 3633, AS AMENDED, TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION

 

ROLL CALL:  MOTION PASSED 8-0-1

REPRESENTATIVES VOTING AYE:  Barnhart, Berger, Farr, Hopson, Scott, Verger, Williams, Chair Shetterly.  EXCUSED:  Hass.

 

Reps. Verger and Farr will carry the bill.

 

348

Chair Shetterly

Closed the work session on HB 3633.

 

 

 

 

 

349

Chair Shetterly

Meeting adjourned at 9:35 a.m.

 

 

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant

 

Exhibit Summary:

1.       Yates, “Staff Measure Summary HB 3633”, 1 page

2.       Yates, “HB 3633-4 Amendments”, 1 page

3.       Yates, “Revenue Impact HB 3633”, 1 page

4.       Cooper, “Statement”, 3 pages

5.       Lorensen, “Written Testimony“, 2 pages