Loss of tax incentive leads Molpus to consider closing property

Gates have been placed on roads and other accesses on the company’s property, but no firm date has been set for closing the gates. When the company receives the signs it has ordered, they will go up and gates will be closed, according to Craig Halla, Molpus Minnesota property manager.

Rep. David Dill is concerned about the effect to the tourism industry as the Arrowhead and Voyager snowmobile trails cross the company’s property many times and it’s too late in the season to even consider a reroute.

“This is a huge economic issue for the whole area,” said Dill, fearing that visiting snowmobilers won’t return if the trails are difficult to follow and hunters will go elsewhere — each group spending their money in a different part of the state.

At issue are the payments the company expected through the Sustainable Forest Incentive Act, which once paid the company more than $2 million for its property and was capped by the Minnesota Legislature in 2010 at $100,000 regardless of the amount of acreage enrolled. SFIA has paid landowners between $7 and $13 per acre per year, but lawmakers set the tax break at $7 per acre and added a cap of $100,000 to any single landowner.

Forest Capital, the former owner of the forests now owned by Molpus, lost at least $1.9 million, said Dill.

“It’s a major bur under their saddle and I don’t blame them,” he said.

Halla said the company once had 280,000 acres enrolled in SFIA. It now has 128,000 acres enrolled because of the cap.

The gates have been placed on property no longer enrolled in the program, he said. Property that could be gated includes boat landings, road systems and snowmobile trails.

The plan to gate and post areas and to withdraw acreage from the program “is a result of the tax incentive going away that we have to take a look at the cost of all our business, including the cost to allow for public recreation.”

Halla said the omnibus tax bill in which the SFIA payments were reduced notes “the modest amount of tangible public benefits of that program” and that it should be reduced to help balance the state budget for fiscal 2012 and 2013 biennium.

“This is the basis of how they came about their decision and its completely wrong,” said Halla. “Public access is restricted, which is not our long-term intent, but we need to be fiscally and financially responsible to our investors and open access comes at a cost and we’re trying to figure out how to pay for this.”

Dill agreed that capping the payments was wrong. And he said the state owes Molpus about $4.2 million in payments under the original SFIA deal.

“I didn’t think it was right to cap the payments and demand they follow the rules of the SFIA program,” said Dill. “All of us from the north fought this tooth and nail.”

Open to solutions

Halla said the company is open to solutions and there is no “drop dead date” on closing the gates and posting the signs.

What would keep the gates from being closed?

“We still have 128,000 acres enrolled in SFIA and Oct. 1 we should have received a minimum payment of $7 per acre, and I’m pretty sure that will be capped at $100,000 and that would a good start,” said Halla.

Halla added the company will continue to manage its ownership sustainably for forest management reasons and is still certified.

The northern legislators did not favor the cap that was also reaffirmed in the 2011 special session, Halla noted.

“The southern legislators don’t understand how much the public uses this land,” he said.

Halla said the Legislature last year ordered a study of property taxes paid by large forest landowners.

“They realized there was a problem or they wouldn’t have put that bill in there,” he explained. “That gives us hope toward resolution.”

Former Sen. Bob Lessard says the state reneged on a deal with the company made through SFIA.

“We owe an obligation,” he said. “What would you do if you were the land owner? You would close it.”

Lessard suggested that the payments be made quickly and discussions began with the company about conservation easements. And when the Legislature convenes in January, it gets to work to restore the original SFIA deal.

“I don’t think we can wait for the Legislature,” he said. “This has to be taken care of right now. There has to be a way to buy time until the next legislative session.”

Under conservation easements, the land would be kept open to the public in exchange for a lump-sum payment up front. Molpus has more than 100,000 acres in state-owned conservation easements in Koochiching and Itasca counties.

Dill said time is of the essence as the deer hunting and snowmobiling seasons approach.

“We are working at speed to try to find a solution on the short term and in the long term,” he said. “What those solutions are, I don’t know but I do have some ideas.”

Private property

And Lessard reiterated the company has the right to close lands not enrolled in SFIA to the public.

“It’s private land,” he said. “It’s no different than a farmer or someone else who owns land. They have the right to close it.”

But the fact that the land is not public, doesn’t matter to some people.

Mike Felix of Grand Rapids left a message at The Journal saying he will continue to drive on the Sheep Ranch Road regardless of gates or signs. He and his brother own 40 acres nearby and have been using the property for 25 years.

“I don’t care what they say about easements. Nobody gave me permission to drive on that road before and I will drive on that road. If there is a gate there, it will come down,” he said.

Dill agreed with Lessard and said it is not wrong for private property owners, including companies and individuals, to protect their property rights.

The name of a person threatening violence over the gates to Dill in a telephone call will be turned over to the Minnesota State Patrol, said Dill.

“We will not entertain or discuss any violence over access to property. This is a legal issue, not an issue of violence,” he said.