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Stakes are sky high in severance tax game

Where we stand

August 12, 2012
The Mining Journal

For the past several months, township, county and schools officials in Marquette County have seemingly been playing a high-stakes game of poker with mining companies, state lawmakers and administration officials over a the notion of creating a severance tax for non-ferrous mining projects, like the Rio Tinto Eagle Mine.

The general idea of the tax is to combine and simplify current mining taxes, lessen start-up costs for new mining operations and use some of the proceeds to establish a regional economic development fund for infrastructure improvements.

Local officials came late to the game, having discovered mention of the proposed tax by chance in a downstate newspaper article. By that time, state Rep. Matt Huuki, R-Atlantic Mine, had already worked up a draft or two of proposed legislation and had been in discussions with mining companies.

Local officials have worked hard to get into the game, trying to determine who's holding what cards, the value of those cards and what strategies are potentially afoot to minimize their stake.

The biggest concern remains keeping tax revenue flowing to local schools, townships and government operations in at least the same rates assessed under the current tax structure.

As they have from the start, locals fear money will be siphoned off to state coffers at the expense of area interests.

The issue of what percentage of severance tax will keep locals whole remains in contention.

There have been numerous meetings, including video and in-person conferences with Huuki and state treasury and Department of Environmental Quality officials debating various aspects of the issue including, the valuation of the Eagle Mine, which was set at $191 million.

Locals have still not conceded that figure as valid because of the calculations process, confidential mining company deductions allowed under tax laws and the percentage of discounts approved.

There have been seemingly continuous side talks between the various interests involved. The administration has worked to develop its own version of the tax plan, said to be simpler than Huuki's. Meanwhile, Huuki continues to develop his rendition, while local officials and mining company interests re-assert and lobby their own wishes.

After all of this effort, and with patience wearing thin, the county board voted at its last meeting to urge state officials to call a meeting of all concerned to resolve the outstanding issues now.

The board wants everyone to gather in the same room, around the same table and finish the game.

We couldn't agree more.

Though any agreement would be subject to the legislative process, if there is to be a severance tax and we think there is the sooner the details can be conclusively established, the better.

There's too much at stake to lose for local entities already worn thin by unfunded state mandates and revenue sharing reductions. Ladies and gentlemen, turn over your cards.



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