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August 02, 2005

Financing A Forest

Ponderosa Oregon appears set to lead the way in an innovative approach to protecting forestlands. A new state law allows local governments to form "forest authorities," which can purchase forests using government bonds. The authority retires the bond with the revenue generated by sustainable-yield timber cutting and perhaps even recreation fees. The upshot is that local governments can preserve both timber jobs and forests, rather than losing them to sprawling development. It's not surprising that the first forest authority will be near Bend, where population is booming and development is rampant.

Conservationists in Washington tried the same tactic a few years back when the Evergreen Forest Trust attempted to purchase 100,000 acres of Weyerhauser forest in King County. The attempt ultimately sputtered out because Congress dragged its feet on approving tax-exempt bonds (which are more attractive to investors) for conservation measures. But Oregon's Republican Senator Gordon Smith is going to try again.

The Eugene Register-Guard has the full story.

Posted by Eric de Place | Permalink


A wise observer (not me) noted:

It’s actually a subsidy to the timber industry. Trees grow slower than money and publicly traded corporations are being pressured by Wall Street investors to divest themselves of underperforming assets. A huge underperforming asset of wood products companies is timberland. It is worth, on average in the nation, $868/acre and it produces very low returns. This is why we see Boise and others sell their lands to Timber Management Investment Organizations (TIMOs) or Real Estate Investment Trusts (REITs), both of which have tax advantages for the super rich that own them. Often the sale includes an agreement to sell the timber right back to the company for milling. However, taking the asset off the books, generates cash for dividend or additional investment and makes the return on asset figure look all the better.

With community forests, the non-profit carries the asset and it doesn’t care about return on investment. The subsidy comes in that non-profits don’t pay taxes and now can borrow money at lower interest rates with government backing. Some of these forests are being sold as long-term revenue generators for schools and other government services. Timber is still a lousy investment (compared to no-risk bonds). It’s one thing to cut timber (especially in fire-suppressed stands) to pay off the bonds, but it’s quite another to dedicate revenues after retiring the debt to government services. It’s that coupling of logging our forests to educate our kids and fill our potholes that conservationists have worked to decouple on federal lands.

Posted by: Doug | Aug 9, 2005 11:30:54 AM