Blandin's tax battle stuns Iron Range

  • Article by: MIKE KASZUBA , Star Tribune
  • Updated: July 30, 2011 - 10:42 PM

The forestry company received millions in Legacy money to put land in conservation easements but now wants its taxes reduced.

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A hardwood stand on UPM Blandin Paper land, near Grand Rapids, Minn., in 2009. That year, the forestry company was hailed for placing all of its northern Minnesota forestland in state conservation easements to prevent development. In return, the company was given $44 million, most of it coming from the state's new Legacy money.

Photo: Ann Heisenfelt, Associated Press - Ap

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Two years ago, the forestry company UPM Blandin was hailed for placing all of its northern Minnesota forestland in state conservation easements to prevent development. In return, the company was given $44 million, most of it coming from the state's new Legacy money.

But few predicted what is now unfolding: Blandin is challenging the property tax assessments on large parts of that land, saying the land has fallen in value.

The move has caught state and county officials off guard and could mean big revenue losses for those counties if UPM Blandin succeeds in having its property assessments lowered.

In Aitkin County, the tax challenges involve 126 property parcels, most consisting of 40 acres apiece. One township has 36 parcels with estimated market values ranging from $34,400 to $58,500.

"This is going to be a big thing," Brian Connors, Itasca County's assessor, said in addressing the potential property tax losses for his county.

In one of their property tax petitions, which may indicate their overall strategy, Blandin officials said assessors had erred in two ways: They set the property's market value higher than its actual value and assessed the property "unequally" when compared with other properties.

Blandin officials have not yet responded to assessors' requests for a more detailed explanation of the challenge.

"The matter will be resolved by whatever authority we're before, or will get before, eventually," said Terry McBride, an attorney for the multinational company. He declined to comment further.

At the time it was made, the payment to UPM Blandin was the largest expenditure of Legacy money, a sales tax fund that Minnesotans had approved in 2008 to help preserve the state's outdoors, clean water, parks and arts. Though the agreement was criticized by some as being too generous to the company, conservationists said it represented a rare opportunity to preserve large sections of timberland before they were developed.

Putting the land into conservation easements does not prevent Blandin from harvesting its timber.

An unexpected challenge

State officials, including those who championed the conservation easements, appeared surprised by the company's move.

"I have not heard about it, either internally or from Blandin," state Department of Natural Resources manager Richard Peterson said in June. Peterson was the agency's point person on the conservation easements, and his statement came two months after UPM Blandin had begun filing its tax challenges in Itasca County. Peterson said he had met with company officials earlier in the spring, but the topic had not come up.

County officials said they, too, were surprised the company would agree to place nearly 190,000 acres of its property in conservation easements, accept the Legacy money and then turn around and challenge the property values. "It honestly hadn't crossed my mind that a year after or two years after the thing went into effect that they would do it," said Rusty Eichorn, the Itasca County Board chair. "So I was surprised."

Connors said he recently met with county assessors from three counties -- St. Louis, Aitkin and Koochiching -- where UPM Blandin had filed tax challenges to see if anyone could detail why the company had done so. No one, he said, had any definitive answers.

"For all I know, they could be saying that it's a swamp, or they could be saying that it could be on the Legacy easements," he said. Connors said he has asked the company -- so far, without a reply -- to formally outline its reasons because "you want to find out what the person's thinking."

Property assessment

UPM Blandin's conservation easements were financed with $36 million in state Legacy money and money from the Blandin Foundation, which at one time was associated with the giant, Minnesota-born paper company but today is a separate entity. The company is now a subsidiary of UPM-Kymmene, a Finnish conglomerate.

When the conservation easements were announced in 2009, UPM Blandin said it was "a willing participant" in the negotiations and saw the agreement as a way to "require sustainable management of the property as it is today, regardless of who may own the property in the future."

A company spokesperson said the Minnesota properties were its only forest holdings in the United States and, since buying the Blandin paper mill in 1997, the company had not sold any of its holdings.

An appraisal conducted for the state Department of Natural Resources placed the value of the conservation easements at $41.8 million and said it would cover 187,878 acres owned by the company. The largest area -- 155,093 acres -- is in Itasca County.

Bill Becker, who leads the Lessard-Sams Outdoor Heritage Council, an advisory group that recommended the Legacy funding for the easements, said he, too, was largely unaware of the company's tax challenges.

But, he said, "If the counties properly assessed the land as working industrial forest -- the highest and best use -- the easements shouldn't be the grounds for the appeal because [they] did not affect the highest and best use."

Financing sustainability?

UPM Blandin also has benefited from other, similar state programs.

Since 2003, UPM Blandin has gotten at least a half-million dollars annually -- the payments peaked at $1.6 million in 2009 -- through the state's sustainable forest incentive program. The program makes annual payments to forestland owners as an incentive to practice long-term sustainable forest management.

Galen Tveit, a former Aitkin County commissioner whose district included much of the conservation easement land, said he was not surprised UPM Blandin has filed tax challenges. "It didn't really surprise me -- you know, anything to make a buck," said Tveit, who said he did not blame the company for wanting to cut its taxes.

But he said he always opposed using Legacy money to spur UPM Blandin to simply continue practicing sustainable forest management. "That's what really burned me," Tveit said.

Allison Ahcan, a spokesperson for the Blandin Foundation, said that while the foundation had not heard of the tax filings, the conservation easements had "widespread community support." She added: "We continue to strongly believe that this project has been a positive and important investment."

Mike Kaszuba • 651-222-1673

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