Humboldt Redwood says tax relief rights a wrong; deal would uniquely benefit company that bought Pacific Lumber

John Driscoll/The Times-Standard

Posted: 10/07/2010 01:19:13 AM PDT

The chairman of the Humboldt Redwood Co. defended lobbying efforts to relieve it of a $20 million tax burden imposed just weeks after its parent corporation bought the old Pacific Lumber Co.

A Los Angeles Times article Wednesday portrayed the language in the draft budget as a tax break to the wealthy Fisher family -- which owns Humboldt Redwood. But the company's chairman, Sandy Dean, said that had Mendocino Redwood Co. known that bill would come due on top of the roughly $500 million acquisition of PL during bankruptcy proceedings in 2008, it would have scuttled the deal.

”We would have had to abandon our effort,” Dean said.

Instead, Mendocino Redwood sealed the deal in late July 2008, forming the Humboldt Redwood Co., which now runs the Scotia sawmill and oversees 200,000 acres of timberland. Weeks after the closure, the Legislature suspended write-offs for corporate losses in an attempt to close the budget deficit that year, losses Humboldt Redwood expected to claim.

Humboldt Redwood went to the Legislature earlier this year to find a remedy, and the Los Angeles Times reported that a deal was struck during closed-door talks with Gov. Arnold Schwarzenegger and top lawmakers.

While the tax fix would apply only to Humboldt Redwood -- whose well-connected owners have contributed some $6 million to California political candidates and causes since 1999, according to the Los Angeles Times -- Dean said that Humboldt Redwood is the only company that suffered so substantially under the 2008 suspension. He said that legislators were aware that a correction needed to be made.

”The reason that folks have been receptive to addressing this is because of the unintended consequences and the unique damages that were done to HRC,” Dean said.

Still, taxpayer watchdog groups called the measure a special-interest grab in the Los Angeles Times story, coming at a time when the state can ill afford to lose any revenue.

Sen. Patricia Wiggins, D-Santa Rosa, said in a statement that she was notified when the tax break became part of budget negotiations. Ordinarily, she said, tax breaks are a mixed bag and can be questionable. But the Fisher family faces a problem created by the state, Wiggins said, and it should be righted, especially in light of Humboldt Redwood's commitment to manage the forest responsibly. She also warned that if the tax break fails to go through it could unravel the deal made in bankruptcy court.

”If we did not include this tax break, the land could go back on the market and wind up in the hands of owners who are far less responsible when it comes to workers, jobs and the environment,” Wiggins said.

Assemblyman Wesley Chesbro, D-Arcata, did not respond to the Times-Standard's inquiry by deadline.

PL had been a constant source of controversy since Houston financier Charles Hurwitz launched a successful hostile takeover of the company in 1985. Logging rates skyrocketed, quickly clearing out most of the company's old-growth redwoods. That prompted persistent protests and lawsuits from environmental groups, North Coast residents and the Humboldt County district attorney. PL went bankrupt in January 2007.

Later that year, Mendocino Redwood emerged as a key player in the bankruptcy when it joined with PL creditor Marathon Structured Finance Fund to lodge a bid with the court. In April, in an effort to ensure that PL's creditors didn't foreclose on the mill and the land, the pair upped their offer to what Dean said was the maximum it could pay.

Along the way, environmental groups that had long opposed PL operations sided with Mendocino Redwood, which had a reputation as a more gentle land manager. Those groups were swayed by the company's promises to instill the same policies and honor PL's obligations under the 1999 Headwaters deal, in which PL sold 7,400 acres to the state and federal governments for $480 million and agreed to a conservation plan.

Scott Greacen with the Environmental Protection Information Center said that he can't comment on the appropriateness of the budget provision in question. But he said that Mendocino Redwood's commitments have been honored.

”As far as we can tell so far,” Greacen said in an e-mail, “the answer is yes.”

John Driscoll covers natural resources/industry. He can be reached at 441-0504 or jdriscoll@times-standard.com.

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