MARQUETTE - Two things the Marquette County Board and a Lansing delegation agreed on Tuesday - after a lengthy discussion on potential creation of a non-ferrous mining severance tax - were that many questions remain unanswered and that the talks were a seemingly productive first step.
The delegation's speakers, which included Keith Creagh, director of the Michigan Department of Agriculture and Rural Development, Valerie Brader, deputy legal counsel and senior policy adviser for Gov. Rick Snyder and Hal Fitch, state geologist and director of the Michigan Department of Environmental Quality's Office of Oil, Gas and Minerals, made initial statements and then fielded three rounds of questions and statements from the county board, and some others from the public, over roughly two hours.
"As we continue to inform and be informed, we continue to evolve," Creagh said. "I don't think anyone at this table will tell you it's a finished product. I think this is an opportunity to try to get it right."
Article Photos
State geologist Hal Fitch, left, discusses valuation of the Kennecott Eagle Minerals Co. mine Tuesday at a meeting of the Marquette County Board. Also pictured from a Lansing delegation are Keith Creagh, director of the Michigan Department of Agriculture and Rural Development and Valerie Brader, deputy legal counsel and senior policy adviser for Gov. Rick Snyder. (Journal photo by John Pepin)
The basic premise of the administration's proposal is instead of having four different taxes for non-ferrous mining (real property, personal property, corporate income, and sales and use), a single severance tax (set percentage charge of gross ore sales revenue) would be developed.
The tax would not apply to related milling or other operations unless they are contiguous to the above-ground mining operations. A rural development fund to support long-term regional economic opportunities would be created.
The 3 percent tax will be designed to deliver the same or more revenue to local governments as the current ad valorem property tax system. Creagh said the severance tax would be collected by the locals with 45 percent of the revenue maintained by the impacted counties, townships, school districts, intermediate school district and school aid fund.
The distribution of funding will follow the current property tax distribution and offset revenue that would have been provided to the locals under the current property tax model. The remaining 55 percent of the severance tax will go into the rural development fund.
This fund would provide dollars, including matching funds, to facilitate infrastructure improvements for broadband/Internet connectivity, energy, rail and talent to strengthen rural economies.
"We're looking for a tax
policy that's simple, fair and efficient," Creagh said. "Our proposals start at 3 percent because that's what we thought would hold local communities harmless and also establish a rural development fund."
Brader said the current ad valorem property tax system poses numerous problems compared to the relative simplicity of a severance tax.
"One of the real disadvantages to the current tax system is the number of subjective factors, where you really have to take your best guess as to what the future holds, and also a lot of complications with trying to apply a tax law which was really not written for mining," Brader said. "What we're trying to do is come to something where we can share the up side and reduce the downside and our current system doesn't really let us do either."
Fitch explained the process of calculating the true cash value of the Kennecott Eagle Mine, which was set at $191 million in February. Some provisions of the calculation - including Kennecott's detailed expense deductions - were disclosed to only a few as provided under state tax law.
That valuation and determining what amount is necessary to keep local tax revenues in place were among the key concerns of the county board.
"It goes back to this: what makes us whole and we need to come to an agreement on that," Chairwoman Deborah Pellow said. "And before we can do any of these other things, before we can decide on a split or anything else, we need to have some kind of consensus on that."
Commissioner Michael Quayle said he couldn't vote one way or another on the issue now.
"If you put 10 percent on the table and gave us 80-20 (split) or we stick with ad valorem, because nothing is factual. It's all assumptions," Quayle said. "And it's all based on the figures that the mining company gave you."
Commissioner Steve Pence said some of the starting points were "troublesome."
"The starting point at 3 percent does seem wrong, the $191 million may or may not be wrong and I think we keep fighting the good fight and yet somehow I think instead of giving me Commissioner Rules when I started, maybe someone should have given me a manual for living with defeat, because I think that's how it feels when you deal with the state of Michigan," Pence said.
Commissioner Gerald Corkin said local units of governments have suffered with unfunded state mandates and funding cuts to education.
Commissioner Bill Nordeen voiced the most acceptance of the severance tax idea Tuesday. He said he thinks Kennecott will pay more under severance tax and money that would have gone to Lansing in the form of other taxes, would now go to the rural development fund, which could benefit the region. He said the determination of who decides what will make locals whole is a key concern.
John Pepin can be reached at 906-228-2500, ext. 206. His email address is jpepin@miningjournal.net.