MFL: local tax shifts from new enrollments

The current version of the MFL changes moving through the legislature (SB161) would both (1) increase the amount landowner would pay to close land under the MFL and (2) shift which government units ultimately receive those closed area fees. In this post, I want to focus on (2), perhaps I’ll find time to discuss the other at some point.

As initially enacted, the MFL held local government units harmless (i.e., no net loss of local revenue) through dynamic state aid formulas (see this post for background). If land entered the MFL, there would be a near equal rise in state aids. However, state aids to counties and municipalities were frozen in 2004. After that time, towns and county weren’t ‘reimbursed’ for new enrollments resulting in tax shifts to other property. As we found in a this study, these shifts were relatively small in most cases as most assessed value is associated with improvements (i.e., houses, building, etc.), not vacant land.

That said, most land enters the MFL to reduce the taxes paid, suggesting that high value forestland or forestland where the value had increased dramatically are more likely to enter the program (interesting, testable hypothesis). This is the perspective that some local government folks hold (based on several phone calls and e-mails).

Allowing the closed acre fee to be retained at the local level would provide additional revenue to local units of governments.  Moreover, the legislative intent of the closed acre fees was to purchase public access. I.e., a state board was to allocate the statewide pool of closed acre fees to purchase easements, leases, or land to provide more public access for recreation. However, that spending never occurred, and the money went to plug state budget holes–by both Republicans and Democrats, Governors and Legislatures.

The recreational intent of the closed acre fee is retained in the current draft legislation, which requires county governments in most situations to spend a sizable portion of this fee on public access.

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