Missouri bill would reduce property taxes for sawmills

Sunday, March 20, 2011 | 4:58 p.m. CDT

CAPE GIRARDEAU — Taxes could be sliced significantly for Missouri's sawmills, but it could come at the expense of some public school districts.

Legislation that has passed the Missouri House and Senate in different versions would reclassify sawmills as agricultural property. That would mean they would be assessed at 12 percent of their productive value for property tax purposes, instead of 32 percent of market value as commercial property.

The change could save Missouri's sawmills about $4 million in taxes annually, costing schools and local governments an equal amount.

Supporters of the legislation say the national decline in housing construction in recent years has taken a large notch out of sawmill revenues.

"The reasoning behind this bill is simple: For many small rural communities in Missouri, the local sawmill is the prime source of income for the area citizens. Several of these mills are teetering on the edge of collapse, due to the spiraling economic situation," Sen. Dan Brown, R-Rolla, wrote in a recent electronic newsletter.

The Senate passed Brown's legislation reclassifying sawmills on Thursday, sending it to the House. A week earlier, the House passed a similar bill by Rep. David Day, R-Dixon, sending that version to the Senate. Both chambers must pass the same version of the legislation for it to go to the governor.

Legislators passed a similar tax reduction for sawmills in 2009, but it was vetoed by Gov. Jay Nixon because of concerns he had about an unrelated section of the bill.

The U.S. Department of Agriculture ranks Missouri third in the nation based on economic effects of forestry, and most of its more than 400 sawmills are in the south-central region of the state.

Except for property tax purposes, sawmills already are regulated by state and federal agencies in much the same way as other agricultural businesses, said Steve Jarvis, executive director of the Missouri Forest Products Association.

"This change will give a little tax break that should have been given all along. It's really to right a wrong," Jarvis told the Southeast Missourian newspaper.

House Speaker Steven Tilley, R-Perryville, agrees.

"This is an industry that is unfairly taxed," Tilley said.

But some school officials are concerned about the effect of the proposed sawmill tax break.

Bleau Deckerd, superintendent of the Altenburg School District, told the Southeast Missourian that the legislation would cost his school system between $40,000 and $80,000 in property tax revenue. Deckerd said it might not sound like much to larger school districts, but the maximum amount of lost revenue would account for nearly 6 percent of Altenburg schools' $1.4 million budget.

The district's biggest industries are sawmills, including the biggest sawmill in Southeast Missouri, East Perry Lumber Co. in Frohna.

Deckerd said he doesn't understand why sawmills should be classified as agriculture. He described the legislation as a slippery slope that could lead to regulating industries such as auto manufacturers as agricultural entities because they take steel from the earth to build cars.

But sawmill operators argue the planting of trees for the production of wood is no different from farmers who harvest corn or soybeans.

Tommy Petzoldt, procurement manager at East Perry Lumber Co., said the tax reclassification would take some of the financial pressure off Missouri's small sawmills, many on the verge of extinction. For bigger mills, the lower rate would provide incentive for growth, he said. East Perry Lumber employs 80 people, some of whom send their children to the Altenburg School District.

"What we have to think about here is the viability issue, that there be a business in that local small town for all these parents to have a job," he said.

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