5.5.2017 – The Plight of the Forest Products Industry
As we have worked out the details of our various bills, we have become more aware of an issue that could have a huge impact on the working landscape in Vermont. S.34, an act relating to cross-promoting development incentives and State policy goals, includes a provision that would eliminate the sales tax on logging equipment and parts. This inclusion generated discussion about the state of the Vermont forest products industry and, unfortunately, it is not a rosy picture.
Several years ago, the House Agriculture Committee expanded its purview to include Forest Products. This included anything having to do with trees after they have been cut off the stump. Our goal was to try to apply the same principles used to promote local agriculture in order to improve the situation for the forestry industry. At the time, we added forest products representation to the agriculture development board that had been created. Later, we made sure to include the forest products industry in the Working Lands Enterprise Initiative. This year, House Agriculture and Forest Products became Agriculture and Forestry so our purview broadened even more widely.
When we worked on the Working Lands Enterprise Initiative it was revealed in a survey done by the Vermont Council on Rural Development that 97% of the Vermonters polled believed that the working landscape is key to Vermont’s future. The forest products industry is a huge part of that working landscape, which also includes agriculture. Vermont is 78% forested, which offers a rich natural resource if it is maintained and managed properly. Foresters, loggers, truckers, sawyers, and many others are critical to the forest products industry but recent developments are conspiring to make life harder for these workers.
Regional and national events have occurred that may have devastating effects on Vermont’s forest economy. Five major pulp mills in Maine have closed in a little over a year and a half. These provided significant markets for low-grade forest products and demand has dropped 35% regionally. Because the market has been suffering regionally, loggers from other states have been lowering prices and increasing the competition for Vermont markets, such as schools that heat with wood chips. The reduced demand and lower prices at other mills that purchase Vermont products have had a chilling effect on the lives of our forest products workers.
Additionally, lower costs for propane and heating oil have put downward pressure on the value of forest products. To make things even more difficult, the Trump Administration recently placed a tariff on any softwood lumber crossing the border from Canada to the United States.
For years people have remarked to me (and I have noticed myself), the number of trucks from Quebec heading north on Interstate 91 loaded with logs. Sixty-seven percent of the fir and spruce logs cut in Vermont are delivered to Quebec sawmills. The logs are processed there and many are sent back to the United States as lumber to be used in construction. What effect will the new tariff have on this practice and should it be applied when the logs are from Vermont in the first place?
We have asked why our sawmills have been closing and why the Canadians can continue to process when we can’t. One of the reasons given is the health care system in Canada that offers comprehensive health care to all at a reasonable price. Another issue for our loggers is the incredibly high rate of workers’ compensation insurance rates in Vermont.
Vermont realizes $1.4 billion in economic activity each year from the forest products industry. When we consider what good forest management practices contribute to the health of our environment including clean air, clean water, and wildlife habitat, we should be thinking about what kind of investments we can make to assure our forestry products industry survives this economic downturn. Our forests also provide the natural resource for our maple industry, not to mention tourism, which brings in $460 million yearly from our foliage season.
All of our neighboring states including Maine, New Hampshire, New York, Massachusetts, and Connecticut have a sales tax exemption on logging equipment – Vermont does not and this is something we are considering. Almost more important would be to exempt parts since many loggers can’t afford new equipment and are spending more money repairing what they already own.
Exempting logging equipment from sales tax would be a relatively small gesture and would help level the playing field with other states. The price tag for this is somewhat hard to determine but is estimated to be in the neighborhood of $100,000 per year. If we aren’t able to make this a reality this year, it is hoped that the governor will include it in his budget next year.
Tacked to the bulletin board in the House Agriculture and Forestry Committee room is a bumper sticker that reads “Local Wood, Local Good”. If we could all think creatively about how we can make a difference for our forest products industry, good things might come of it.