Conservative Cutting

Are private owners of forest lands in the State of New York endeavoring to develop plans of forest management? prehensive mass of information is available on which to base an answer, but the following facts indicate that the practice of forestry is making progress in establishing itself as an important factor in the management of commercial timber lands.

When lumbering operations were confined principally to the extraction of saw timber, the investment in machinery was small as compared with the amount of material handled. The loss in machinery and improvements when the supply in one region was exhausted and the plant was abandoned or dismantled was negligible. Today, however, in the State of New York, the bulk of the logging operations are carried on in connection with the pulp and paper industry, in which the investment in plant runs into the millions. Where the old time lumber operators led a nomadic life, moving from one region to another, the pulp and paper industry is tied to one location by the very magnitude of the investment in plant and machinery. This has exercised a very profound influence on the methods of logging. Every pulp and paper company of any magnitude in this State has a trained forester in its employ. Diameter limits in cutting are set and observed. Young growth is protected against damage during logging operations. Waste has been reduced by a closer utilization of the timber cut. Slash is handled in such a manner as to minimize the danger of fires. In short, many of the larger holdings of timber land in the State are being managed in a manner more nearly approaching the methods taught in the schools of forestry. An estimate by an eminent forest engineer who is conversant with the situation places the area of privately owned timber land in the State which has reached a close approximation to a sustained yield basis at 500,000 acres.

Exercise of Police Power Over Forest Management

As this practice grows, as company after company falls in line, as individual companies improve their methods, the groundwork is being laid in public opinion for general laws, based on the police power, governing the handling of forest lands. When that time comes, it will no longer be necessary for the State to say to the timber land owner: "If you will manage your forest thus and so, we will give you a certain amount of relief from taxation.' The two questions will be dissociated and the State will say to the land owner simply this: "In the interest of the welfare of the State, you will conform to certain standards of forest management.

European countries have long exercised the police power in this respect. The enormous development in recent years of zoning

The conservation commission in cooperation with private land owners has established an effective plan for fire control covering 7,270,000 acres in the Adirondack and Catskill regions. This area, under authority granted by Chap. 38, 1923, is being considerably extended.

in municipalities, which is based on the exercise of the police power in connection with the utilization of urban property, gives ground for hope that the same principles may soon be applied to forest property also. The technique of administration in the urban field, furthermore, points the way to avoiding the features of highly centralized administration which have characterized the forest management bills hitherto introduced in this State. The type of flexible administrative machinery which has been proven successful in the administration of zoning ordinances may well be adapted in decentralized form for the enforcement of district forest management regulations.

Reforesting

But it is not alone in the management of existing stands of timber that forestry is making progress. More than 76,000,000 seedlings and transplants produced by the State nurseries have been set out in forest plantations since 1901. At the rate of 1,000 trees per acre, this means that more than 75,000 acres of denuded lands have been replanted. Considerably more than 40,000 acres of this area consists of privately owned forest lands. Just how much of this area is eligible for separate classification under the three sections of the existing law, there is no immediate means of ascertaining. Certainly it is far in excess of the 1,300 acres separately classified.* If, now, the burden imposed by the general property tax had been as serious as some of the advocates of changes in the law insist, it is reasonable to assume that there would have been a much greater tendency on the part of those actively engaged in reforesting to escape the tax burden by taking advantage of the provisions of the existing laws.

The accompanying table, headed "Summary of Forest Trees Planted in New York State Including Only Stock from State Nurseries, 1901-1923," is based on information obtained from the Conservation Commission and gives the distribution of the trees planted by years and by classes of ownership. The very steady increase in plantings by private owners, except during the war years, when labor was scarce, is especially notable, together with the further fact that the State nurseries during 1923 were unable to supply the demand from private owners for trees. Among such unfilled orders at the end of the past year was one for 500,000 trees. In order to meet the growing demand, the State nurseries are being enlarged to supply 12,000,000 trees in 1924 and 17,000,000 in 1925.

It must be borne in mind also that these trees do not include those planted from other than State nurseries. Some of the large timber companies are developing their own nurseries.

In the light of these facts, it is apparent that forestry in this State, at least, is in a convalescent stage in spite of the present tax laws. Not only are many second growth and virgin areas being conservatively managed, but denuded areas are being replanted every year at a rapidly accelerating rate.

* See page 21.

SUMMARY OF FOREST TREES PLANTED IN NEW YORK STATE INCLUDING ONLY STOCK FROM STATE NURSERIES, 1901-1923

*Total for eight years.

† A discrepancy of 100 trees occurs at these points in the state's official figures. The figures here set down are adjusted, totals based on the sum of the first two columns.

B-TAXABLE CAPACITY OF FORESTS

In spite of the fact that a great deal has been written of late years on forest taxation, your committee has been able to gather little or no information as to the taxable capacity of forests. What is the average annual gross or net income from any given type of forest lands in this State? What percentage of that gross or net income can be taken in taxes without acting as a deterrent to reforesting or as an incentive to premature cutting? To neither of these questions has your committee been able to formulate a clear-cut and definite answer.

The reasons for this lack of information on questions so fundamental to the entire discussion of forest taxation are not far to seek. In the first place, the practice of forestry in this country is so new that the necessary information as to the annual increment in timber volume on virgin or second growth stands has not yet been collected over a long enough period to provide a basis for a well founded judgment. In the second place, the stumpage value to be applied to the annual increments in timber volume is still largely a matter of opinion because of the constant but uneven increases in stumpage values in all parts of the country. In this contingency the advocates of reform in the methods of taxing forests have had recourse to the following methods of arriving at the taxable capacity of forests. They assume a given

land value per acre, annual costs of management and protection, and annual taxes, and then proceed to compound all these elements in the cost of producing the forest for the estimated period of growth. In the case of a forest plantation, they also include the cost of planting. They then apply an assumed stumpage value to the estimated volume at the period of maturity and strike a balance. Not infrequently they succeed in proving by this method, not only that forest lands can stand no tax burden whatsoever, but that the owner will face a loss even after the complete remission of taxes. Mr. R. B. Goodman, representing the Northern Hemlock and Hardwood Manufacturers' Association, submitted to the United States Senate Committee on Reforestation one estimate of $3,838.22 as the cost of carrying one acre of naturally reseeded land to maturity in one hundred years. This estimate included simply the compounded interest at 6 per cent on an investment of $5 an acre in land, and the compounded value at the same rate of annual taxes at 30 cents, and of annual costs of risk, care and fire protection at 8 cents per acre. Even if the taxes of 30 cents per acre per annum, which Mr. Goodman compounds to $1,691.10 were entirely remitted, the owner would still have to sell his estimated volume of four to eight thousand board feet of timber at the end of the period for between $268 and $536 per thousand on the stump in order to break even.*

In all fairness to the advocates of tax reform in this State, the committee must admit that no figures submitted to it for its consideration have reached any such totals as those just quoted. This extreme case was cited simply to illustrate the remarkable results which can be achieved by the use of the method.

The criticism of the method itself is a matter of some delicacy, since it seems to have the sanction of the outstanding experts in the science of forestry. Nevertheless, your committee ventures to point out certain oversights in the usual plan of applying the method. The criticisms are based on the results of the comparison of a number of cost tables, some of which were submitted to the committee in manuscript form and others of which are to be found in the current literature on the subject.

The Rate of Interest

As a rule the cost tables are built up by compounding at rates of interest between 4 and 6 per cent. The following table, quoted from an article by C. H. Guise, entitled "The Rate of Interest as a Factor in the Cost of Growing Timber," will bring into clear relief the extreme importance of the rate selected for compounding. The table indicates the amounts to which $1,000 will accumulate in fifty years at rates of from 3 to 6 per cent compounded annually, and the corresponding rates of simple interest which it would be necessary to earn on the capital in order to yield as great an accumulation at the end of the period:

* Hearings Select Committee on Reforestation U. S. Senate, p. 589. Cf. Pulpwood and Wood Pulp in North America by Royal S. Kellogg,

1923, Chap. XVI "The Cost of Forestry."

Journal of Forestry, Vol. 20, 1922, pp. 589–592.

COMPARISON OF SIMPLE AND COMPOUND INTEREST ON BASIS OF EARNINGS OF

By means of this table Mr. Guise drives home forcibly the need for extreme care in the selection of a compound interest rate for use in building up cost estimates. A rate of 3 per cent com pounded annually is equivalent to a simple rate of 6.76 per cent for a period of fifty years, while a rate of 6 per cent compounded for the same period is equivalent to a simple rate of 34.84 per cent.

Period During Which Interest Is To Be Compounded

Not only the rate, however, but also the length of time for which compounding is to be carried on, exercises a profound influence on the results obtained. In order to make this point clear, your committee submits the following table showing the accumulations of $1,000 at 6 per cent compounded for periods ranging from forty to one hundred years, together with the corresponding simple rates required to yield equivalent sums:

COMPARISON OF SIMPLE AND COMPOUND INTEREST ON BASIS OF EARNINGS OF $1,000 AT 6 PER CENT COMPOUND INTEREST FOR VARYING TERMS

On the basis of this table it is clear, not only that the selection of a rate of interest is of prime importance in setting up timber cost tables, but that the selection of a period for compounding is of even greater importance.