Daniel Mintz, The Independent – 10/20/2009

The latest hearing on the county’s General Plan Update showed that environmental consciousness is split when it comes to land use standards for farm and timber lands.

The Update’s various policies on preventing conversion and restricting subdivision of resource lands were extensively debated at an Oct. 15 Planning Commission hearing.

Alternative A, the GPU’s most development-restrictive option, has become the focus of disagreement. Its policies set large minimum parcel size standards and increase restrictions on subdivision of farm and timber lands.

Although Alternative B, a less restrictive compromise option, is the one county planners recommend, Alternative A’s policies are feared by Realtors and developers because there’s an escalating surge of advocacy for them.

And in areas like Southern Humboldt, where homesteading is a respected tradition, the idea of preventing homebuilding on farm or timber land is equated to unnecessary loss of property rights by some.

Many Southern Humboldt speakers said they want to maintain the right to build on their land and can live on it without negatively affecting the environment.

“Most people who have bought TPZ (Timber Production Zone) land didn’t do it to shirk their taxes, they bought it because they had the dream of building a home and living on their property,” said a Miranda man. “Now a lot of them are facing what could potentially be punitive measures.”

A proposed requirement to have a Timber Management Plan in order to gain a homebuilding permit was cited as one obstacle to fulfillment of property rights. Another controversial policy proposal under Alternative A is requiring owners of contiguous resource land parcels to merge them into one large tract.

The concept of creating larger parcels of farm and timber land to prevent residential growth was challenged by several speakers.

Lily Macy, a resident of the Mattole Valley, said she and her husband have lived on a 40-acre parcel for 40 years. A 10-mile area once occupied by 10 families now has 55 families, with no ill effects, she told commissioners.

Macy said people in the valley live on land that was once extensively logged and is now being restored. “The rural lifestyle in Southern Humboldt is not sprawl,” she continued.

But Redway resident Virginia Graziani highlighted “the effect on the market value of resource lands when small subdivisions and greater household density are permitted.” She said an obvious equation is “the more developable the land, the higher the price.”

Under that scenario, buyers of farm and timber lands can’t recover the prices they paid through farming, ranching or timber harvesting, Graziani continued, adding that building entitlements will have long-lasting effects.

Land value is an important aspect of the debate. Earlier in the meeting, Debbie Provolt of the Humboldt Association of Realtors was the first of many speakers who objected to Alternative A’s land merger policy.

Citing acreage values in Southern Humboldt as an example, Provolt said requiring owners of contiguous resource land parcels to merge them into one large tract would have “dire consequences for landowners” by cutting their property values by half in some cases.

One Southern Humboldt resident read a letter from Ettersberg rancher Sally French, who said she opposes ordinances that would “make it more difficult for large landowners” by increasing minimum parcel sizes. French said large landowners need to be able to sell smaller parcels occasionally “so they will be able to keep the rest.”

French said she also supports allowing second “mother-in-law” units on resource land parcels and opposes parcel mergers.

For some, land value isn’t measured in dollars. Many speakers talked about global warming, oil dependency and the value of having expansive tracts of open space. Several people described Humboldt County as one of the last fronts of resource preservation and the host of new conservation opportunities.

“We’re in a position to develop a post-carbon county,” said Mattole Valley resident Willow Rain.

The hearing was continued to October 22 but it’s expected to consist mostly of the completion of the review for urban and rural lands chapters. It will be a “working session” for the Commission, with no public comment.

The Timberland Production Zone (TPZ) and the taxation policies relative to it are not well understood by many. There is a misconception that those who have homes on TPZ parcels have a “subsidized” tax rate on their property. To put this in perspective one must look at the totality of the tax treatment of a TPZ property in light of the following:

1. Proposition 13
2. The applicable annual tax rate
3. TPZ Lands, Timber and Tax Treatment There of
4. Tax equality and fairness

Proposition 13

After Prop 13 was adopted in 1978, the assessed valuation of all California real property was capped at a 2% per year increase in assessment values EXCEPT for TPZ lands and the timber growing upon these lands (standing timber is legally defined as real property). Real property assessment could only exceed this 2% yearly cap upon the sale of the property to a new owner. When a property is sold, the Assessor is allowed to reassess the property to current market value and the 2% per year cap is reinstituted upon the new assessment value.

Applicable Annual Tax Rate

The average annual tax rate of all real property in Humboldt County is slightly over 1% of the assessed value of the parcel. This rate will vary depending upon the number of special district bonds that may be pertinent to the parcel (i.e. school district, water districts etc.).The State’s yield tax rate that is applied to the assessed valuation of timber is currently 2.9%, nearly 3 times the rate of other real property.

TPZ Lands and Tax Treatment

The taxes derived from TPZ lands can be broken down into three categories:

1. Those taxes derived from the underlying ground
2. Those taxes derived from improvements upon the underlying ground and
3. Those taxes derived via the State Timber Yield Tax

The State TPZ law exempts TPZ lands from the Prop 13 cap of a 2% per year assessment increase. Instead it allows the State Board of Equalization (BOE) to determine the assessment values on an annual basis. The BOE notifies the County Assessor annually as to what the permitted assessment will be. The initial assessed value of the highest Site TPZ land was originally set at $80/acre (1977) and in 2007 it was set at $248/acre. This reflects a 310% increase in assessed valuation, which equates to a 10% per year average annual increase in assessed valuation. This is 500% more than would be allowed were TPZ lands subject to Prop 13 (as all other lands are).

The County Assessor is permitted to assess the improvements upon a TPZ parcel in the same manner as a non TPZ parcel. A residence on a TPZ parcel is treated similarly to a house that is situated on a differently zoned parcel. It receives the benefits and constraints of Prop 13, just like a house elsewhere would. The Assessor is also allowed to assess the ground underlying the building site of an improved TPZ parcel and assess it as any other parcel. Normally this building site size is set at least one acre and is valued as such. So there is NO tax break given to the residence situated upon a TPZ parcel.

Standing timber is classified as real property and is subject to the State Yield Tax. Since the yield tax was implemented in 1976, the assessed valuation of young growth redwood timber has gone from an initial assessed valuation of $120/MBF (initial 1977 value) to $830/MBF (12/31/08 value). This is a 700% increase in valuation over a 31 year period, which reflects an average annual increase of over 22% per year. Contrast this to Prop 13′s cap of 2% per year for all other real property assessments.

Tax Equality and Tax Fairness

Taxation equality is a myth and owners of equal properties do not pay equal taxes.

For example: consider three separate, side-by-side identical subdivision houses (A, B&C). All three houses were built and sold in 1990 for $100,000 each. Taxes were (at 1% average) $1000/year.

In 1995 – House A sells for $150,000 – taxes are now $1500/year (1%)
Houses B&C taxes are $1104/year (Prop 13 adjusted)

In 2005 – House B sells for $300,000 – taxes are now $3000/year (1%)
House C taxes are $1345/year (Prop 13 adjusted)
House A taxes are $1826/year (prop 13 adjusted)

Three identical houses, each with a different taxation value.

Summary

In summary, once one gets beyond the rhetoric and sound bites of “tax payer subsidies” and “tax inequity” regarding TPZ lands, the facts are:

1. Residences on TPZ lands are treated no differently than any other residence on non-TPZ lands.
2. TPZ lands are exempt from the Prop 13 two percent annual assessment cap and have averaged a 10% annual assessment increase since inception of TPZ.
3. Standing timber is exempt from Prop 13 and its increased annual assessment has averaged 22%/ year since the yield tax inception.
4. The annual tax rate on timber is 3 times the rate of other real property.
5. Tax policy is not “fair” and it is a rarity when identical properties pay identical taxes.