Montana Land Board OKs $21M loan for timberland

AP News
Posted: Oct 19, 2010 8:28 AM
Montana Land Board OKs $21M loan for timberland

The state is moving forward with plans to buy 32,000 acres of former Plum Creek Timber Co. land near the Blackfoot River as early as next month, even though it will cost the general fund $1.5 million a year.

The Land Board, led by Gov. Brian Schweitzer, gave its formal approval Monday to the idea of borrowing money by issuing $21 million in bonds. The Board of Examiners, also led by the governor, backed that decision later in the day.

The notion was first approved by the 2009 Legislature, when the state thought it could buy 26,000 acres. The state Department of Natural Resources and Conservation said real estate prices have dropped, allowing it to buy more.

The DNRC said it will sell logging and grazing rights on the land, with that money going to schools. It could close on the deal next month.

The state will be issuing bonds to pay for the land, with payments from the general fund of tax collections expected to be about $1.5 million a year for the next 20 years.

The income on the land managed by the Department of Natural Resources and Conservation will be about $222,000 a year. But that money is earmarked for a school construction account and will not offset the bond payments out of the general fund.

Montana faces a projected shortfall over the next two-year budget period potential in excess of $300 million. Schweitzer has ordered spending reductions across state government, and is even considering privatizing Medicaid services as a way to save money.

But the governor said the land is a good deal despite the other budget reductions.

The state is getting it cheap and will be paying a low interest rate probably below 3 percent because of its good credit rating, he said. He noted that the land will be generating money _ and appreciating in value _ long after the bond is paid off.

"It will generate a fair amount of revenue until the end of time," Schweitzer said. "This is a business investment. We have in effect bought a tree factory and that tree factory will harvest money for students for the next 100 years."

The land to be acquired is part of the Legacy Project, a project led by The Nature Conservancy, which is transferring 310,000 acres of Plum Creek timberland to public and nonprofit ownership. Plum Creek had considered selling much of the land to private developers.

Mary Sexton, director of the DNRC, said the deal also ensures the land that is highly prized for its recreation opportunities will remain open to hunting, hiking and fishing now that the state is getting ownership.

The land is south of Highway 200 in the Potomac Valley east of Missoula.

One lawmaker who opposed the plan from the beginning said the state's current financial woes only make it a worse decision.

"In tough economic times, that's $1.2 million we have to get to make the general fund whole," said Rep. Tom McGillvray, R-Billings. "It's the wrong direction, an it's not responsible. We don't need more land, we can't afford it."

The Land Board earlier this year also endorsed an idea to use roughly $40 million PPL Montana has been ordered to pay to buy up more of the former Plum Creek Timber land currently owned by The Nature Conservancy. PPL has not paid the money and is still contesting the order in court.