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Joint Report of the New York State Department of Environmental Conservation and Board of Equalization and Assessment on THE FOREST TAX LAWS (Sections 480 and 480A of the Real Property Tax Law)

December 1993


A series of five hearings were conducted during the first week of October 1993. They were held in Ray Brook, Schenectady, Sherburne, New York City, and Monticello. In addition, written public comments were accepted until October 25th. Approximately 160 people attended the hearings, and nearly one hundred offered comments, criticisms, or suggestions. Total attendance was highest in Monticello, with about 90 people, and lowest in New York City, where only one person appeared. A brief characterization of the comments made by each person during the hearing process may be found in the appendix to this report.

On the basis of the comments received, there appears to be strong support for continuation of some sort of forest tax exemption program in New York. As might be expected, beneficiaries strongly endorsed the programs, and few, if any, attendees suggested outright repeal. Local government officials were inclined to discuss the local fiscal impact of the exemptions. Several people also expressed concerns about perceived inconsistencies in administration and program requirements and the differences in benefits received under Sections 480 and 480-a.

The majority of comments made related to the fact that good forest stewardship benefits the state as a whole, and that there should therefore be a statewide sharing of program costs. In other words, it was seen as unfair to impose the cost of securing these statewide benefits on the smaller rural municipalities where the land is located. Examples of the benefits accruing to society as a whole that were cited included wood products and the resulting jobs provided, clean filtered water and air, aesthetics, wildlife habitat, rare plant and animal communities and outdoor recreation.

Concern was expressed over administration of both programs, and especially with the level of DEC oversight of Section 480-a properties. Several people discussed broadening the scope of the program to include forest stewardship activities beyond the present timber production orientation. Concern was also expressed over infringement of private property tights and the issue of public access to enrolled lands.

Another theme that emerged in the hearings was the fiscal burden the programs impose on the relatively few communities throughout the State where they are especially prevalent. The greatest impacts cited by local officials occurred in a few towns in the Catskill area, primarily in Sullivan County, and a few Adirondack-area towns, primarily in Essex County. It was frequently pointed out that since the exemptions are not local-option, the residents of these heavily-impacted communities had no voice in determining whether or not they are desirable.

Some local officials also expressed frustration over administering the Section 480 program, and about the general lack of accountability associated with this exemption. Although current beneficiaries tended to argue for continuance of Section 480, there was a general attitude among local officials that this program is really obsolete and should be phased out. A few program participants also cited anomalies in terms of their current assessments and it became apparent that some Section 480 properties are assessed at higher levels than similar property which is not in the program. This means that the owners must pay stumpage taxes at the time of harvest although they are not receiving any property tax benefits.

A few hearing participants advocated development of a "current use" assessment scheme for arriving at taxable forest land values, but when questioned further on how such a scheme would work, or what current use values actually were, they could not provide any concrete details. Instead, they offered discussion of practices in other states as examples of how such a program might work. Other participants in the hearings suggested use of a flat tax per acre for forest lands. While such an approach makes sense from the standpoint of simplicity and predictability, local officials have cited fiscal concerns that would make its adoption difficult. Because the property tax is the most flexible local tax, it is the revenue source that local governments use to balance, their budgets. Once other sources of revenue are estimated, property tax rates are set at the appropriate level to yield the remaining revenue needed to cover projected expenditures. To the extent that the property tax base would become less flexible through adoption of a flat tax for forest land, local governments would lose some of their ability to generate the revenues necessary to fill budget gaps. Moreover, any imposition of a flat tax would effectively eliminate all future growth in the property's tax liability, further handicapping local governments.

Also raised was the issue of residential development on or adjacent to lands currently or previously receiving exemptions. In particular, instances were cited where landowners were leasing sites for construction of hunting-cabins or vacation homes in locations surrounded or bordered by exempt forest land. Such sites can be excluded by the owner during the initial application to the 480-a program, so no penalty would be imposed as a result of construction. Some respondents argued that there is a need to prevent abuse of the program by landowners who seek to maximize returns from recreational development at the expense of forest and open space values.

The next section of the report presents recommendations for program changes that would appear to remedy existing deficiencies. While some are straightforward and require little or no further elaboration, others are presented in the form of general concepts and will require further definition and refinement in terms of setting key parameters and devising detailed administrative measures.

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