Policy & Legislation

2016 Managed Forest Update from BC Assessment

Craig Barnsley, Manager—Major Industry, Power & Linear Assessment, BC Assessment

Craig Barnsley, BC Assessment

A big PFLA thanks to Craig Barnsley for presenting an update from BC Assessment at our 2016 conference held June 2nd, at Painter’s Lodge, in Campbell River.

For those of you who couldn’t make it, we’ve included the complete PowerPoint presentation below. Click on the arrows to move through the slides.

You can also follow this link to view the presentation on Slideshare: 2016 Managed Forest Update from BC Assessment

The 30-slide presentation includes:

  • A brief history of BC Assessment
  • Description of the annual assessment roll
  • Property classification value comparisons
  • Key dates to remember for BC Assessment
  • An overview of assessment appeals
  • Facts about Managed Forest classification for 2016
  • Detailed description of the Managed Forest application process
  • Explanation of the assessed value calculation for Managed Forest land
  • Samples of bare land value rates and cut timber rates
  • Information about the Managed Forest valuation review for 2017

Thanks again to Craig Barnsley for taking the time to join us. Please let us know if you have any questions, concerns or feedback.

PFLA Joins the Canadian Association of Forest Owners in Ottawa

Parliament Hill, Ottawa, Ontario, Canada

Parliament Hill, Ottawa, Ontario

PFLA headed to Ottawa, May 3 to 5, 2016, to join members of the Canadian Association of Forest Owners (CAFO) from across Canada.

Along with CAFO’s annual general meeting, the purpose of the trip was to meet with key decision-makers in Ottawa—to explain some of the challenges CAFO members face, as well as identify opportunities for private landowners to help the new government meet its goals and priorities.

Meetings with MPs focused on ridings where CAFO members own land and conduct operations (approximately 27 ridings across Canada). We also met with committee chairs for the environment and natural resources, along with committee members and Conservative and NDP critics of various portfolios such as environment, natural resources, rural affairs, parks and wildlife.

Meetings with officials included the deputy Minister of Environment and Climate Change Canada and senior staff with Parks Canada, Environment Canada and Natural Resources Canada.

One of the highlights of the three-day trip was a reception hosted by the Speaker of the House of Commons, the Honourable Geoff Regan. Thanks to the efforts of the speaker’s staff and CAFO members, who encouraged many MPs to attend, about 20 MPs and senators stopped by to hear about CAFO, our challenges and the ways CAFO can work with the new government to help address many of their priorities.

In his remarks, Geoff Regan said, “CAFO members tell me that the productivity of private forests can be both a blessing and a challenge. Forests that are good at growing trees are also good at producing things like clean water, fresh air, recreation sites, wildlife, carbon and all sorts of other benefits. The challenge, I am told is when you try to balance all these benefits with maintaining a successful business in a very competitive international marketplace. The further challenge is that most private forest land is located very close to populated areas so you need to be a good neighbour, providing all sorts of benefits to your neighbours, usually at no cost to them!”

Following the introduction, CAFO Chair Domenico Iannidinardo commented on the challenges CAFO members face when dealing with federal legislation like the Species at Risk Act and the Migratory Birds Convention Act. He also described how CAFO members can work with government to achieve goals related to species at risk, protection of watersheds and sequestering carbon. We extended an invitation to MPs to come visit CAFO members’ operations and see, firsthand, how private forests are managed and on the ground challenges are met.

Thanks to CAFO Executive Director, Chris Lee, for his work putting the event together.

Understanding Property Taxes on Managed Forest Land

close up view of a red pin and a sticky note with text: taxes

Property tax incentives are a key component of the Managed Forest Program. Recent increases in bare land assessed values have forest owners concerned about a corresponding increase in property tax bills for 2016.

Based on these concerns, PFLA initiated a conversation with BC Assessment, as well as the Tax Policy Branch of the provincial government.

Thanks to a communication with Duncan Jillings, Director, Property Taxation, Tax Policy Branch, Ministry of Finance, we’ve received some clarification on how property taxes are calculated for properties within the Managed Forest Land Classification.

The amount of tax payable on a property depends on three factors: the classification of the property, the assessed taxable value of the property and the various tax rates that apply to the property.

BC Assessment assesses Class 7 Managed Forest Land using a two-step process that includes the bare land component, as well as the value of harvested timber.

While the majority of your property might be classified as Class 7 Managed Forest Land other portions might be classified in other classes, for example: Class 1 Residential, Class 4 Major Industry, Class 5 Light Industry or Class 6 Business and other.

If nothing else changes, a higher assessment value on a property, or a higher tax rate, will lead to an increase in tax payable. However, things do change.

Calculating provincial school and rural area taxes

Since 2008, the province’s policy is to capture only an inflationary gain from non-residential classes in its provincial school tax and provincial rural area tax, plus any revenue from new properties or new construction on old properties.

Inflationary gain refers to the BC Consumer Price Index, (1.1% inflation last year), not inflation of land values.

That means, by current policy, if managed forest land values double for all types of forest land, then provincial school and rural tax rates for managed forest land are cut in half, and the inflation factor added.

This calculation is applied to the property classification as a whole.

Under this policy, the province expects only modest revenue increase from a property class, unless there are new buildings, new properties entering the class, or land which has been re-evaluated with respect to its topography, accessibility or soil quality.

If one forest owner’s property value went up while another’s went down, year over year, with no changes to the physical property, one owner would see a school and rural tax increase and the other a tax decrease, while both owners would see an inflationary increase.

School tax rates for the Managed Forest Land Classification have been about the same (in the range of $2.3/$1000 to $2.1/$1000) since 1999, the first year of the new tax regime. In comparison, school tax rates for Business Classification were about $9.9/$1000 in 1999, and declined to $5.8/$1000 by 2015.

Calculating police taxes

For police taxes, the province is looking to recover a certain percentage of police costs. If managed forest land values go up faster than values in other property classes, the MFL class will pick up a larger share of the tax burden.

If managed forest land values rise slower than other property classes, then the police tax burden on the MFL classification will fall relative to other classes.

With property values going up faster than inflation in most property classes, average tax rates are falling, and individual members will need to look at both their assessed values and their police tax rate if they want to see how their police tax burden is changing.

Regional district taxes

Regional districts also tax to pay for their annual budgets. The tax rates will vary depending on services, costs, and assessed values.

The province imposes tax rate ratios on regional districts. When regional districts set tax rates to recover costs, the Managed Forest Land Classification rate must be set at three times the residential rate.

On it’s own, the 3:1 ratio on regional districts looks bad to managed forest landowners, but it was part of a package that actually helped forest owners overall.

When managed forest land tax changes were implemented, regional districts had recently lost considerable base because machinery and equipment were removed from the property tax base in the 1980s. The government wanted to avoid further shifts of tax burden to other property classes, perhaps residential class in particular.

When the MFL changes were made, tax shifts were reduced by requiring regional districts to keep a higher ratio on managed forest land than would otherwise have been the case. The province lowered its rural tax rate for managed forest land to provide the tax benefit directly to the Managed Forest Land Classification.

MFL ratios are more favourable under provincial school and rural area taxes, but less favourable under regional district taxes, regional hospital district taxes and the newer provincial police tax.

You can find more information about How Managed Forest Land is Assessed and How to Classify as Managed Forest Land from the BC Assessment website or contact the Managed Forest Council.

Managed Forest Fundamentals: Landowner Incentives

Douglas-fir stand on Vancouver Island

 

Welcome to the long-awaited, fourth and final post in our “Managed Forest Fundamentals” series.

Because it’s been a while, here’s a quick recap: Inspired by the realization that not everyone is as familiar with the Managed Forest Program as we are, we set out to rectify the situation by providing information about the fundamentals of the program.

The four fundamentals are:

  1. A Provincial Regulatory Model
  2. The Managed Forest Council
  3. Key Environmental Protections
  4. Incentives for Landowners

The first post shed light on the foundations of the provincial regulatory model. In our second post, we worked to dispel any confusion between the Private Forest Landowners Association (PFLA) and the Managed Forest Council (MFC), while the third post emphasized the legislation and regulations in place to protect public environmental values.

This fourth and final post relates to incentives for landowners by highlighting potential challenges that can negatively impact the viability of tree growing on private lands in BC, and the policy measures currently maintained to address them.

The challenges include:

  • Carrying costs
  • Uncompetitive property tax rates
  • Timing of tax liabilities
  • Uncertainty of owner’s freedom to manage
  • Protection of private property rights

Carrying costs

Growing a crop of trees is a risky, long-term proposition. Trees can take up to a century to mature. Excessive carrying costs, accumulated over time, can easily eliminate the business case for growing a crop of trees.

No business can survive if it spends more than it receives in revenues, so it’s imperative to focus on minimizing wherever possible the burden of significant inputs such as the cost of land and property taxes, or early-rotation silvicultural investments.

In the case of tree growing, the cumulative negative impact of up to a century of interest of the cost of money expended on anything at all can be massive in the long run, so the name of the game is to minimize costs and shorten the crop rotation. It’s essential that owners are able to minimize the cost of brushing treatments, minimize the cost and impact of red tape, and avoid unnecessary expenses.

Public policy affects the cost of wildfire protection, herbicide use, and treatment of residues from the previous harvest. The ability to use late-rotation fertilizer, improved seedling stock, and the freedom to harvest the crop on an economic rotation also make a big difference.

Uncompetitive property tax rates

Forestry is a very global, very competitive business, and BC is an exporting jurisdiction heavily dependent on international trade. To stay in business, BC forestry operators must compete with producers from around the world. Since property tax comprises such a significant portion of the cost of growing timber on private land, excessively high tax costs can dissuade owners from growing trees because there is no business case for putting seedlings in the ground.

Compared to competing jurisdictions around the world, BC has relatively high property taxes for forested lands. When setting property tax policy, it is important to take a global view, and ensure that BC’s competitive position is not undermined or squandered.

The managed forest program includes property tax incentives that are intended to encourage owners to plant trees and grow timber by making it worthwhile to do so instead of pursuing other land uses, or neglecting the land entirely. The incentive is to assign a distinct assessed value based on the capacity of the land and tax that value accordingly.

A similar public policy approach is used across North America, and the general idea can be compared to property tax incentives employed to encourage agriculture on private lands. The BC managed forest program has its origins in the 1940’s.

Timing of tax liabilities

The second element of the BC managed forest property tax incentive is to defer the taxation on the value of the growing crop until after that crop is actually harvested. The intent of this policy is to minimize the property tax burden during the phase when the land has zero cash flow. Clearly, without cash flow, the owner would have to borrow money or divert it from other sources in order to meet the tax burden while the crop was still growing, and this would be a significant disincentive against growing trees.

Uncertainty of owner’s freedom to manage

The Private Managed Forest Land Act is built around the understanding and arrangement that forest owners commit to grow and harvest trees, and protect key public environmental values in exchange for receiving some policy certainty and property tax incentives from government. This arrangement is a partnership, with the intention that owners provide the land and the capital and take all the risks, and government maintains the policy climate and tax regime that encourages the activity.

The importance of allowing the forest owners freedom to manage is very simple, and is well illustrated by comparing the growing of trees to the growing of an agricultural crop. Growers – whether they are raising turnips or potatoes or trees – need flexibility to be able to react and adapt to the changing circumstances that impact the nurture and marketing of the crop. Storm events, insect and disease attacks can wreak havoc with a crop of timber, and owners need to be able to move fast to take preventative or remedial actions.

Without losing sight of the owner’s responsibility to follow the law and protect key public environmental values, complex prescriptive government rules and permitting processes can result in unnecessary delays, and lost opportunities to make the best choices.

An appropriate level of operational flexibility and freedom to make the right day-to-day management decision can make or break an enterprise. The Managed Forest Program is designed to balance the protection of the environment with the needs of the operation.

Protection of private property rights

The wants and needs of society are constantly evolving. It’s not unusual for neighbouring communities to change their appetite for timber harvesting before a crop that has received substantial investment is ready for harvest.

Also, government may decide that a piece of private forest land has desirable attributes for recreational or conservation purposes. The commitment from government to protect private property rights is merely an acknowledgement that the forest owner has made significant investment in land, time, capital and risk in order to have the opportunity to harvest a crop of timber at some point in the future.

When public policy constrains or prevents the owner from harvesting that crop and recouping the related expenses, it’s only fair that the owner be adequately compensated for the loss of value. Without such certainty, there would be a massive disincentive against growing timber crops. Forest owners need certainty that only government can provide.

CAFO Participates in the National SARA Forestry Roundtable

Canadian Association of Forest Owners logoPFLA continues to enthusiastically support the Canadian Association of Forest Owners (CAFO) to ensure PFLA member interests are sufficiently represented in Ottawa.

Managing Director, Chris Lee, is encouraged to report that CAFO members are making steady progress working with like-minded and influential organizations across the country to effectively carry a united and consistent message to Ottawa.

CAFO is actively participating in the National SARA Forestry Sector Roundtable process. An initiative led by the Forest Products Association of Canada (FPAC), the roundtable brings together FPAC member companies, provincial forest industry associations and CAFO.

After a number of conference calls, the group met face-to-face in Ottawa last week. The goals of the meeting included:

  • Provide participants with information about the Species at Risk Act (SARA) and the Committee on the Status of Endangered Wildlife in Canada (COSEWIC)
  • Discuss progress on recovery documents
  • Compare experiences with different provincial approaches to species recovery

Chris Lee provided the group with an update on the work CAFO is doing with Environment Canada to include forest certification as a means of demonstrating protection under the Species at Risk Act.

The meeting also included a half-day session devoted to discussing how to move forward as a sector and how to engage with the new federal government.

CAFO is also working closely with the Canadian Federation of Agriculture (CFA) and the Canadian Federation of Woodlot Owners (CFWO) to finalize a letter to the newly appointed Minister of Environment and Climate Change, Catherine McKenna.

Chris Lee explains, “The letter from the national organizations representing forest owners, land managers and farmers across the country requests a meeting with Minister McKenna to discuss how we can best support her to deliver on priorities related to species at risk and migratory birds.”

CFA, CFWO and CAFO have agreed on three priority areas to work on with the Minister and her department:

  1. The two-step process for identification of wildlife habitat (first on public land and second on private land).
  2. Allowances for incidental take under the Migratory Birds Convention Act.
  3. Recognition and support for valuing the provision of ecological goods and services provided by landowners to Canadians.

Chris Lee sees these activities as “valuable relationships that help CAFO bring forward our issues with important key partners—other landowners and other forest managers.”

To learn more about CAFO, please visit the CAFO website or contact Chris Lee.

You might also be interested in highlights from PFLA’s trip to Ottawa earlier this year.

PFLA Policy Update — November 2015

UpdatePFLA remains actively engaged on a number of important policy files relevant to forest owners across the province. We make every effort to maintain regular communications with elected officials, ministry staff and community members to ensure the perspective of private forest owners is understood at all levels of the policy making process.

As we wind our way toward the end of 2015, here’s a brief update, in no particular order, to keep you informed about a few of the policy areas we’re working on right now.

BC Assessment and Property Taxation

Property taxation is a re-emerging issue. There appears to be an upward pressure on assessed property values, which in turn could translate into upward pressure on property tax bills for 2016. PFLA is monitoring the situation closely and will advocate on behalf of forest owners as needed.

Eligibility and succession planning within the Managed Forest Program is another area we continue to work on with the Managed Forest Council and BC Assessment to obtain better policy transparency and clarity.

Tina Ireland, Director Property Owners, with BC Assessment has nothing new to report since her presentation at PFLA’s 2015 conference. Tina expects business as usual for the rest of the year as they work toward finalizing any changes in 2016.

The Species at Risk Act and the Migratory Birds Convention Act

Both the Species at Risk Act and the Migratory Birds Convention Act remain important policy file areas. PFLA continues to work closely with the Canadian Association of Forest Owners (CAFO), the farming community, and other land managers across B.C. and Canada to make sure landowners are recognized for the existing measures taken to protect endangered species on private land.

The goals continue to be: 1) Receive credit and recognition for the habitat land managers provide on private property. 2) Receive compensation when the ability to grow and harvest timber is restricted.

If you have any specific concerns or feedback about these policy areas, please contact PFLA directly for more detailed information and insight into PFLA’s participation with these ongoing policy processes.

Water Protection on Managed Forest Land

Water quality is one of the key public environmental values protected within the Managed Forest Program. PFLA is engaged with the Managed Forest Council (MFC) and Ministry of Forests, Lands and Natural Resource Operations (MFLNRO) staff on a number of very active local water initiatives.

The goal is to educate the public, local government and communities about the protections, practices, relationships and programs already in place to protect water quality on private forest land. This is also an opportunity for PFLA to listen and understand what local concerns are and look for common ground.

Because protecting water quality is fundamental to the Managed Forest Program, the Managed Forest Council is also looking closely at water protection. The MFC is in the process of evaluating the effectiveness of water protection under the current regulatory regime and best management practices model.

Please contact the Managed Forest Council directly for more information on this process.

Log Export Restrictions and Market Access

Log export restrictions are another key policy area PFLA continues to be diligently involved with. PFLA is actively monitoring international developments and, as always, the goal is to obtain international pricing for private land logs.

Galiano Island Residency Issue

PFLA has participated in a number of productive meetings throughout the year and continues to work closely with the province to find a solution to the Galiano Island residential issue. The objective is to permit one residential dwelling per title on Galiano Island, which is consistent with the policy intent as reflected everywhere else in the province.

Provincial Inventory Program

The province is currently undertaking an inventory program for public land. PFLA is working closely with MFLNRO staff to achieve an appropriate level of distinction for private land. PFLA has concerns about access to information on private land and is working hard to ensure private forest owners in British Columbia are treated with the same level of respect as forest owners in competing jurisdictions

Wildfire Response Agreements (WRAs)

Wildfire Response Agreements (WRAs) for private land are set to expire at the end of March 2016. The province is revising the formula they use to calculate the rates for private landowners to have provincial resources conduct initial attack and response on their land. The government is anticipating a rate adjustment based on actual costs and is engaged with landowners in advance of the 2016 fire season.

Hopefully, this brief policy update provides enough information for you to get the gist of what we’re focused on these days. If you have any question or concerns, or if you’re interested in more information, please don’t hesitate to contact PFLA directly.

Managed Forest Council Update for 2015

Rod Davis, Chair of the Managed Forest Council

Rod Davis, Chair of the Managed Forest Council

Thanks to Rod Davis, Chair of the Managed Forest Council, for his presentation at PFLA’s 20th annual conference in Courtenay, June 4th, 2015.

If you weren’t able to attend the conference, you can view the slides from Rod Davis’s presentation below. To enlarge the presentation click on the white box with the arrows in the bottom right corner and then use the arrows in the centre to scroll through the presentation.

The slides include information about:

  • Who council and staff members are
  • List of key management objectives for Managed Forest land
  • Budget trends for the MFC
  • Activities highlights from 2014 for the Managed Forest Program
  • Owner activities (e.g. harvesting and reforestation levels) for 2014
  • Information about operation compliance to the legislative and regulatory requirements
  • Contact information for the MFC

A quick reminder: the Managed Forest Council (MFC) is the independent public regulator of forest practices under the Private Managed Forest Land Act.

The MFC is empowered to make and enforce regulations to encourage sustainable forest management and protect key environmental values on private managed forest land.

As the regulatory body, the MFC can:

  • Assign penalties
  • Make remediation orders
  • Enter into consent agreements
  • Revoke status for landowners
  • Issue stop work orders

The operations of the council are 100% funded by annual fees paid by managed forest owners.

An audit and inspection program is designed to ensure the council has adequate information of landowners’ operational compliance with the forest management requirements.

The Field Practices Guide (available as a pdf document on the MFC website) outlines practices, standards and expectations to ensure compliance with the regulatory requirements.

If you have any questions or feedback about the Managed Forest Program, you can reach the MFC by phone at: 250-386-5737 or by email at: office@mfcouncil.ca