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County hires law firm to study severance tax

September 13, 2012
By JOHN PEPIN - Journal Staff Writer ( , The Mining Journal

MARQUETTE - The Marquette County Board voted Tuesday to hire the law firm of Miller Canfield to answer prominent severance tax related questions at a cost not to exceed $25,000, with up to $5,000 of that sum expected to be reimbursed by Rio Tinto.

The firm will analyze differences in opinion between the county, Rio Tinto (Kennecott) and the state government on tax valuation and revenue figures, which factor prominently into the creation of a severance tax on non-ferrous mining operations.

State officials and lawmakers told the county board this week no severance tax legislation will be introduced until after the Nov. 6. general election, giving the parties involved more time to work out remaining differences.

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Two crucial issues the law firm is expected to try to resolve include the disputed valuation of the Eagle Mine, set at $191 million in February, and whether Proposal A caps affect the severance tax, which would be designed to replace the current ad valorem property tax.

The key underlying issue is what percentage of the severance tax local taxing authorities, including schools and local governments, should receive under the new severance tax in order to provide the same amount of revenue derived under the ad valorem tax structure.

County board Chairwoman Deborah Pellow said Rio Tinto officials think Proposal A caps will take effect under this year's $191 million valuation of the mine set by the state geologist, while county and state government officials disagree.

"Until the Proposal A question is answered, we can't go forward," Pellow said.

A Miller Canfield attorney is expected to make a summary appraisal of the geologist's valuation, address the Proposal A concerns and help the county construct an appeal to the state tax commission. The appeal would be based on a misstatement of fact that the valuation was a "partial" appraisal of the mine's value.

County officials did not contest the valuation at a local board of review earlier this year, based on the understanding the valuation was partial, as stated by state officials.

Commissioner Gerald Corkin said the funding - paid from the county's consulting budget - to get answers from Miller Canfield would be "money well spent."

Commissioner Steven Pence, who abstained from voting because his son-in-law works for Miller Canfield, agreed that pursuing the answers in that manner was a good idea.

"I think we've been floundering on this issue and we're finally getting the help and expertise that we need," Pence said.

Commissioner Michael Quayle said he was unhappy Rio Tinto had agreed to only reimburse work on resolving the Proposal A question, after initially suggesting it would fund all of the county's independent consultant work on the unresolved questions.

"I'm disappointed to hear this change of pace, what I consider a change of pace, of Kennecott paying this bill," Quayle said.

Commissioner Bill Nordeen said he finds it "very unsettling" state government officials can't conclusively answer the Proposal A questions.

Commissioner Bruce Heikkila disagreed with Pence that the county board is "floundering" on the issue. He said the panel has come a long way toward answering questions and resolving issues, with only the current questions remaining.

The attorney's work is expected to start Oct. 1 and take about three weeks to complete.

John Pepin can be reached at 906-228-2500, ext. 206.



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