Native corporations could owe as much as $550,000 in property taxes on land logged last year, a Kenai Peninsula Borough official said.
But Native corporation leaders and loggers said those numbers are inflated, and some questioned how the borough could even think of taxing Native lands.
"We've been encouraged by the Kenai Peninsula Borough to log because of the spruce bark beetle infestation," said Michael Beal, chief executive of Seldovia Native Association.
"At SNA, we're only logging because of the spruce bark beetle infestation, and quite frankly, we find it unfair that for dealing with this natural disaster, the borough wants to tax us."
"That probably puts an end to logging, real quick, which is too bad, because I don't know what we'll do," said Bart Garber, chief executive of Tyonek Native Corp. "We're trying to get that timber out for the fire hazard."
Kirk McGee, vice president of real estate for Cook Inlet Region Inc., proposed an ordinance to the borough assembly in April to exempt land within the borough from new or increased taxes resulting from actions to deal with the beetle infestation.
However, John E. Simmons, assistant borough attorney, wrote back that unless the Legislature passes a law to allow the exemption, the borough has no authority to grant it. The Alaska Constitution requires that all tax exemptions be provided in state law, he wrote.
Shane Horan, the borough's tax assessor, said he discovered after he was hired last August that Native corporation lands being logged were not on the tax rolls.
In a packet transmitted May 18 to the assembly, he proposed "that I would postpone assessing the timberland harvests, as I am sensitive to, and well aware of, the spruce bark beetle infestation and potential fire hazards. In addition, it will allow the Native corporations to pursue possible legislation that may address this issue."
After all, said Borough Mayor Dale Bagley, the borough has never collected taxes from Native corporation lands.
The assembly's Committee of the Whole is to hear a report today at 1 p.m. at the Borough Building in Soldotna. Assembly President Tim Navarre of Kenai said the issue likely will appear on the agenda for a future assembly meeting.
In his letter to the assembly, Horan said 1987 amendments to the Alaska Native Claims Settlement Act exempted Native corporation lands forever from property taxes, except if they were "developed, leased or sold to third parties."
Congress said logged lands should be considered developed only while logging was under way and exempt after logging was finished.
A House explanatory statement says the determination of which timber resources are developed and when they revert to undeveloped status must be made from notifications the Native landholders file under the state Forest Resources and Practices Act.
Bagley said ANCSA unfortunately makes no exception for salvage of beetle-killed trees.
"They're not making much money on it. It's definitely a salvage operation and we definitely appreciate what they're doing. So, do we tax them? According to ANCSA, we definitely do," he said.
Horan said he reviewed detailed plans of operations filed with the Alaska Division of Forestry and consulted Chris Clough, a borough GIS technician, and Wade Wahren-brock, state forest practices forester, to determine the acreage logged last year and to identify logging roads, log transfer sites and related tidelands owned by Native corporations.
He estimated that Native corporations logged 68,000 acres within the borough last year and owned 250 miles of roads.
Assessing land at $500 per acre and roads at $50,000 per mile puts the total value subject to taxes at $46 million, he said. At a rate of 12 mills, or $1,200 for each $100,000 in assessed value, the tax bill for last year alone would be $550,000.
However, Horan said he learned from his predecessor, Jim Lawyer, that neither Lawyer nor his predecessor, Wayne Haer, had assessed property taxes on Native corporation lands being logged.
According to Horan, Lawyer said the potential tax revenues did not justify the manpower required to assess logged lands and defend the values.
Clough said one problem is that the borough does not know whether land covered in the detailed plans of operations actually is logged.
"The borough doesn't have the time to go out and look," he said.
Wahrenbrock said loggers often file plans for large areas to give flexibility. If one area is too muddy to log, for example, a broad plan allows the logger to cut somewhere else. It would take a huge amount of work to determine how much land actually has been cut, he said.
Bernie Brown, vice president and chief financial officer for Gates Construction, among the peninsula's largest logging firms, said 68,000 acres is probably closer to the amount Native corporations have logged in the last decade than the amount they have logged in the last year.
Dean Kvasnikoff, whose firm ANRC Inc. puts timber sales together for Native corporations, said margins are thin.
"It's such a fine line," he said. "If they put this kind of assessment on us, we could do nothing. We'd have to shut down."
If the borough wanted to tax Native corporation land, he said, it should have done so 10 years ago, when the logging was just getting started.
Now, he said, "There's nothing left to tax out there. We're doing cleanup work on what's left over. They're not going to go retroactive back to the beginning. They were only going back to 2000. Where are they going to get the records if they want to go back 10 years? That becomes a nightmare. That's not common sense."
Peninsula Clarion ©2013. All Rights Reserved.