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Mine tax vote set Monday

November 24, 2012
John Pepin - Journal Staff Writer ( , The Mining Journal

MARQUETTE - The house Committee on Tax Policy is expected to vote Monday on whether to move a package of non-ferrous mining severance tax bills on to the full House for consideration.

The panel composed of 10 Republicans and seven Democrats and chaired by Rep. Jud Gilbert, R-Algonac, took testimony Tuesday on the legislation from mining companies, state officials and a team of individuals representing various interests from Marquette County.

"It's all very positive...there's been no doors slammed," said Marquette County Board Chairwoman Deborah Pellow, one of the delegates who testified at the hearing. "It's a work in progress. We're still talking to them and they're still talking to us."

The committee is scheduled to meet at 1 p.m. Monday at the House Office Building in Lansing.

State Rep. Matt Huuki, R-Atlantic Mine, recently introduced the severance tax bills (house bills 6007-6012) aimed at simplifying the tax structure and decreasing high start-up costs for non-ferrous mining operations and creating an associated rural development fund for infrastructure improvements.

Huuki thinks if the bills are voted out of committee they will be considered by the full House by the end of next week. From there, they would go to the Senate, followed by hopeful concurrence with the House and then on to the governor for his signature.

Huuki said Wednesday some changes had already been planned for the bills since Tuesday's hearing, including elimination of transportation deductions for mining companies and altering the proportion split of severance tax revenue between local taxing units and the rural development fund.

"I think we've made a lot of corrections to make this palatable to Marquette County and all the other counties that are going to be affected by this," Huuki said.

Under Huuki's bills, 60 percent of the severance tax proceeds was to be directed to local taxing units to replace revenue currently collected under the ad valorem tax structure. The remaining 40 percent of the tax would go to the new state rural development fund.

County officials have said a 75-25 percent split favoring locals would be necessary to properly replace local tax revenues. Huuki said removing the transportation deductions would increase the revenue in addition to changing the split.

"I think we are getting very close to what would be considered a 70-30 split," Huuki said.

Michigan Department of Natural Resources Director Keith Creagh said the latest proposal Wednesday set the split at 65-35, which would generate about $47 million for local taxing units over the anticipated seven year lifespan of the Rio Tinto Eagle Mine.

"From our perspective, there's good progress being made," Creagh said.

Rio Tinto officials said they were talking with local representatives about some issues they think can be solved between the parties locally, which will ultimately need to be included in the final legislation. Some of those topics include limiting the zone around mining operations eligible for severance rather than property tax and provisions in Huuki's bills requiring repayment of ad valorem for 2012 with interest to the mining company.

"We believe we are close on many items and are open to working together on good solutions," said Matt Johnson, government and community relations manager for Rio Tinto in Humboldt. "We look forward to continuing conversations with local leaders over the coming days."

Marquette County Administrator Scott Erbisch said the tax policy committee allowed the local delegation to present several individuals testifying, along with printed information.

"We really felt that the committee listened and we were all pleased to be given the opportunity to speak," Erbisch said.

Among traveling to Lansing on behalf of the local area were Pellow and Erbisch, Marquette County Commissioner Gerald Corkin, Humboldt Township Supervisor Joe Derocha, Michigamme Township Supervisor Alvar Maki, Bob Nardi of the Marquette Alger Regional Educational Service Agency, Marquette County deputy equalization director Jackie Lykins, state Rep. Steve Lindberg, D-Marquette, Amy Clickner of the Lake Superior Community Partnership and Marquette County civil counsel Stephen Adamini.

In addition, Rick Johnson of the Dodak Johnson lobbying firm and Miller Canfield attorney Jack Van Coevering, both hired by the county, were also at the hearing from the Lansing area. Van Coevering formerly served as chief judge of the Michigan Tax Tribunal and administrator of the Michigan Department of Treasury's legal and administrative hearings divisions.

Johnson led the discussion for Rio Tinto and representatives from Orvana spoke for the mines. Huuki began the discussions. State Sen. Tom Casperson, R-Escanaba, has been working in discussions with the locals since Tuesday's hearing.

Johnson said Rio Tinto is "optimistic the legislation can be enacted by year's end to enable local governments and ourselves to move forward together with certainty and transparency when it comes to the tax revenue our business operations will generate." "This is key to our ability to plan properly for investments in our operations, and as we look ahead to production in 2014," Johnson said.

Johnson said maintaining good relationships with local leaders remains an important goal for the mining company.

"Completing the legislative effort will enable them to be confident in the tax structure and set their budgets for supporting vital public services. That's good for everyone and we have been committed to helping get this done," Johnson said. "Throughout this legislative process, we have consistently advocated that tax revenues generated by mining operations should benefit first and foremost the communities, public services and schools where mining occurs."

Huuki said he thinks all sides have compromised on the severance tax issue.

"I think we're probably at the sweet spot where this is good legislation," Huuki said.

Huuki said he thinks the bills being developed will ultimately allow mining companies to remain competitive on a global scale.

"The main concern out of this bill for me is economic development in the Upper Peninsula," Huuki said. "I think you will see good investment in our commodities for years to come."

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



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