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Mining severance tax draft expected today

August 12, 2012
By JOHN PEPIN - Journal Staff Writer ( , The Mining Journal

MARQUETTE - Marquette County officials are hoping two new opportunities to communicate with state officials will result in agreement on the provisions of a proposed non-ferrous mining severance tax.

Since a draft copy of potential legislation surfaced in December from state Rep. Matt Huuki, R-Atlantic Mine, the idea of developing a severance tax for mines, including the Rio Tinto Eagle Mine, has been explored by lawmakers, local taxing units and officials with Gov. Rick Snyder's administration.

Former Michigan Department of Agriculture and Rural Development Director Ken Creagh remains the Snyder administration's point man on the severance tax issue, despite his recent appointment as director of the Michigan Department of Natural Resources.

Marquette County Board Chairwoman Deborah Pellow said Creagh is slated to provide the latest draft proposal from state officials today. On Tuesday, a conference call is scheduled between state and county officials in hopes of resolving outstanding issues.

"I'd like to give them at least these two meetings to see what we can come up with," Pellow said.

In June, Creagh said 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.

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The tax would not apply to related milling or other operations unless they are contiguous to the above-ground mining operations.

Under the administration plan, the severance tax would be collected by the locals with a percentage of the revenue maintained by the impacted counties, townships, school districts, intermediate school district and school aid fund.

The distribution of funding was to follow the current property tax distribution and offset revenue that would have been provided to the locals under the current property tax distribution model. The remaining percentage of the severance tax will go into a rural development fund to support long-term regional economic opportunities.

The fund would provide dollars, including matching funds, to facilitate infrastructure improvements for broadband/Internet connectivity, energy, rail and talent to strengthen rural economies.

Pellow said there remain differences on how much money, or what percentage, is necessary to keep the local taxing units at the same funding level. The county has also not conceded the true cash value of the Rio Tinto Eagle Mine, which was set at $191 million in February by the state geologist.

Some provisions of the calculation - most notably, Rio Tinto-Kennecott's expense deductions - were disclosed to only a few as provided under state tax law, which has rankled some county commissioners.

Pellow said the administration's proposal is expected to differ greatly from Huuki's draft, which contained more complicated calculations for the tax.

Commissioner Gerald Corkin said this was welcomed news.

"Hopefully, it will be made simple enough the whole world can see what they're paying," Corkin said.

Beyond the two upcoming sessions, Commissioner Nick Joseph said he wants the board to meet with all parties involved "sooner than later" to resolve the outstanding issues. He thinks lawmakers will put off dealing with the tax until after the November general election. He also thinks Creagh's main focus will remain the DNR and not the severance tax, which he said focuses largely on Marquette County.

Joseph said the county should not allow state officials or politicians to set the discussion timetable.

The board voted unanimously Tuesday to send a letter to the state requesting all parties involved meet in the same room and work out a resolution of contested issues. Pellow is expected to update the panel on the latest developments at 6 p.m. Tuesday at the board's regularly scheduled committee of the whole meeting.

John Pepin can be reached at 906-228-2500, ext. 206. His email address is



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