–WAFO COMMENTARY–
IDENTIFIED RISKS COULD RESULT IN LANDS BEING REMOVED FROM THE MFL WITH PENALTIES
In response to criticism from local officials about lands being enrolled in the Managed Forest Law (MFL) that cannot fully meet program objectives, the Department of Natural Resources (DNR) has begun a process to discourage landowners from enrolling some of these lands. While the objective to do so may be understandable, the method they’re using to accomplish this goal has not been developed with all stakeholders and considerations in mind. We hope the DNR will consider pausing before implementing this directive for plans that have already been submitted. This would allow time to get input from landowners, Certified Plan Writers (CPWs), and other cooperators.
On June 10, 2020 the DNR released a directive to CPWs alerting them that all new management plans need to have “foreseeable” risks added if these risks could have possible repercussions on future stand productivity. They noted that this action was being taken to discourage landowners from entering certain parcels by assessing penalties if a “foreseeable” risk occurred that prevented the parcel from maintaining productivity requirements.
This new directive came as a surprise since there had not been any communication with partners about its release.
Who will be affected? The DNR has said it intends to incorporate this new requirement into an estimated 10% of the plans submitted prior to June. Should that occur, some 200 landowners could expect to receive a letter from the DNR similar to an example draft the DNR provided CPWs.
Questions remain about the DNR’s underlying authority and how it may conflict with statutory intent. Recent law revisions specifically include language allowing withdrawals, without penalties, should events occur that are outside of a landowners control.
With passage of Act 358 in April of 2016 sections s.77.83 (3k) and s.77.83 (3L) became law.
(3k)Voluntary withdrawal; productivity. Upon the request of an owner of managed forest land to withdraw part of a parcel of the owner’s land, the department shall issue an order of withdrawal if the department determines that the parcel is unable to produce merchantable timber in the amount required under s. 77.82 (1) (a) 2. The order shall withdraw only the number of acres that is necessary for the parcel to resume its ability to produce the required amount. No withdrawal tax under sub. (5) or withdrawal fee under sub. (5m) may be assessed.
(3L)Voluntary withdrawal; sustainability. Upon the request of an owner of managed forest land to withdraw part of a parcel of the owner’s land, the department shall issue an order of withdrawal if the department determines that the parcel is unsuitable, due to environmental, ecological, or economic concerns or factors, for the production of merchantable timber. The order shall withdraw only the number of acres that is necessary for the parcel to resume its sustainability to produce merchantable timber. No withdrawal tax under sub. (5) or withdrawal fee under sub. (5m) may be assessed.
Changes to NR 46, the DNR’s rule to provide more detail on how the statutory changes made to MFL would be implemented, became effective in March 2020 following two years of development.
The new rule does not include any specific language stating that lands not meeting program requirements can be removed from the MFL, with penalties, if a “foreseeable” risk subsequently occurs.
However, it appears the DNR is now utilizing two sections of their new rule that they say requires them to implement this new process. They note that Section NR 46.18(9), which states in part, “Forest regeneration or health concerns that have foreseeable repercussions on stand productivity shall be identified in the management plan.” This section then goes on to say “These identified risks to lands enrolled that are identified in the management plan may not be the cause for an analysis under s. NR 46.215.”
Section NR 46.125 identifies procedures the DNR will follow to work with a landowner to attempt restoration of non-productive lands. It says in part “The department may order a withdrawal under s. 77.88 (1), Stats., if an owner chooses not to adopt adequate restoration practices or if the department determines that the owner has not sufficiently attempted the restoration practices adopted in the management plan.” In other words, if a landowner did not attempt restoration, penalties would be applied.
Detailed guidance and definitions are needed for this new initiative to be effectively implemented. The DNR states in its directive that “CPWs and DNR tax law specialists are expected to use sound professional judgement to identify foreseeable risks.”
Earlier guidance (now rescinded) did provide some examples. This guidance stated that high risks would include invasive species, emerald ash borer, deer browse and oak wilt along with additional site-specific risks such as those posed by archaeological constraints or by water table issues.
Without more clear direction, it is possible that where deer populations are high a DNR forester or CPW could require this risk to be included in a management plan as being a threat to projects that look to regenerate oaks. If regeneration subsequently failed because of deer browse, the landowner could be forced to remove the parcel and pay withdrawal penalties.
While it is appropriate to identify risks, penalizing responsible woodland owners whose forests suffer events outside of their control seems harsh, especially since the law was changed to allow for withdrawals without penalties should they occur.
The DNR had many opportunities to make CPWs and landowners aware of this new provision. Unfortunately there was no communication of its intent to incorporate foreseeable risk in MFL plans and applying penalties until the June guidance was released. The DNR had actively participated with development of new statutory language related to the MFL over the past several years, but they never brought forward this new approach.
There were also several opportunities where this concept could have been highlighted during the development of NR 46. In the Background Memo to the Natural Resources Board there were several sections where this could have been done, including:
- “Productivity Eligibility” described how landowners would need to sufficiently attempt restorations of non-productive lands before they would be eligible for withdrawals without penalty;
- “Opportunities for Withdrawal” mentioned the new statutory language allowing withdrawal without penalties
- “Restoration” described steps a landowner would need to take to bring lands back into compliance, but there was never any mention of how a “foreseeable risk” could result in lands being removed from the program with penalty.
The DNR also missed an opportunity to inform landowners and CPWs about their proposed directive between the time the Natural Resources Board approved the rule in June 2019 and when the directive was issued on June 10, 2020. Had this been done it would have allowed landowners and their CPWs some time to consider better options as they developed plans that needed to be submitted by June 1 for lands to be entered in 2021. The DNR has correctly stated there is a lot of detail in developing new rules and regulations and they can’t highlight everything. Perhaps they didn’t look at this as being a significant change.
Many landowners and CPWs were left scrambling to develop plans for lands entered in 2021. This may have been avoided if the DNR had proposed the directive between the times the rule was approved in June 2019 and when the directive was issued on June 10, 2020. Given the short time to make changes, landowners and their CPWs did not have time to consider better options as they developed plans that needed to be submitted by June 1.
The Bottom Line. WAFO is asking the DNR to press the pause button and look at other options to manage marginal woodlands before sending out letters to landowners telling them their plans need revisions. Support for the MFL has been growing since passage of Act 358 and landowners have enjoyed better working relationships with their field foresters since then. Hopefully that will continue.
A COMPANION COMMENTARY
ARE MUNICIPALITIES FAIRLY COMPENSATED BY THE PROPERTY TAXES THEY RECEIVE FROM LANDS ENROLLED IN THE MFL?
It is our observation that the DNR believes municipalities are not fairly compensated if lands are removed from the MFL without penalties. In its communication to CPWs on June 10, the DNR stated that “to fairly compensate municipalities, the rule was written to disqualify stands with identified risk from being the reason for a withdrawal without tax and fee should they become nonproductive. Withdrawal taxes are repaid to the municipalities which have foregone property tax payments in exchange for an investment in future forest products.”
Certainly there are many local officials who like to see the revenue generated by the high taxes paid on forest lands and who feel the Managed Forest Law is simply a mechanism to avoid paying taxes. The facts would argue otherwise, especially when compared to taxes being paid on other open rural lands.
Department of Revenue data shows that in 2019, there were 3,537,000 acres of lands in Wisconsin classified as “Productive Forest.” Taxes on these lands averaged $32/acre on a statewide basis. There were an additional 2,207,000 acres of lands classified as “Agricultural Forest.” These are wooded lands located on tax parcels that also have lands on them classified as “Agricultural.” These forests are taxed at 50% of fair market value and taxes on these lands average $23/acre on a statewide basis. In addition, there are the 3,400,000 acres enrolled in the Managed Forest Law, most of which is forested land.
As a comparison, there are 11,927,000 acres of land classified as Agriculture. Taxes on these lands averaged only $3/acre in 2019 despite the fact they put more demands on local services than forested lands.
With the Managed Forest Law, municipalities now receive $8/acre for new enrollments. Some studies say this rate exceeds the costs they incur for providing police, fire, and roads by as much as 10 times. Is it appropriate to say that municipalities aren’t being fairly compensated unless penalties are applied? You decide.