LETTERS TO THE EDITOR
BILL BUCHANAN’S HARDWOOD CHECK-OFF SPEECH AT NWFA WOOD FLOORING EXPO How did we get here? I want to take you back in time for a little bit and hope that it will help everyone understand the process that got us to here.
committee put up their own money and invested their own time towards this effort.
It’s 2005, Eastern hardwood lumber production for the year is 11.3 billion board feet, and total housing starts are 2,068,000 with single family housing starts hitting 1,715,000, their highest on record since they started keeping statistics in 1959. July of 2006, prices for homes peak and multifamily and single-family housing starts end the year at 1,800,000. April of 2007, New Century Financial Corp., a major subprime lender files for bankruptcy and total housing starts end the year at 1,355,000. In March of 2008, Bear Stearns collapses and is bought out by J.P. Morgan. On September 15, Lehman Brothers files the largest bankruptcy case in U.S. history and the very next day the Fed bails out insurance giant AIG. On October 3, President Bush signs into law the TARP program. Combined housing starts for 2008 are 908,000. Then comes 2009, eastern hardwood lumber production falls to 5.73 billion board feet, half of what is was in 2005 and housing starts finish the year at 554,000. There are times during this year that starts actually fall below replacements. Replacements are those houses that were hit by tornados, or other weather related events and those that caught on fire. Economists will call this the bottom of the “Great Recession”, but they aren’t in the forest products or building industry. For those of us who are, 2009 was the bottom of the pit.
In 2008, the U.S. Endowment for Forestry and Communities commissioned an independent study, which concluded that check-offs are the most logical, sustainable model for funding forest products promotion. The Endowment agreed to match the funding raised by the Blue Ribbon Committee. So far, $400,000 has been raised for funding the draft order, staffing, establishing the website hardwoodcheckoff.org and industry outreach.
On August 10 & 11 of 2010, at the invitation of the Hardwood Publishing Co., which is George Barrett’s publication, 77 people from the hardwood industry met in Charlotte, North Carolina, to identify a common vision for the future of our industry. These 77 people represented 25 different hardwood segments, from landowners to brokers, and 24 different states. We were asked to set aside past and current differences and focus instead on common challenges, which if addressed, would strengthen all or most hardwood industry segments. The top 5 challenges identified were: (1) The lack of hardwood’s brand identity, (2) the public perception that harvesting trees is bad for the environment, (3) the lack of cooperation between industry members to address major challenges, (4) the high cost of doing business, and (5) the industry’s lack of resources to get its message out. Surely most people in this room have been to something like this and once you’ve identified challenges… what’s the next thing they ask you to do? That’s right… come up with solutions! When you look at these challenges #1, 2, & 5 are about promotion, education and funding and out of this… the idea for a check-off was reborn. That is what a check-off does, it provides funding for promotion, education and research. As a result of this meeting a group was formed to research and seek passage of a check-off program. I’m not sure who started the group; it was probably several people not just one. I was asked to participate and accepted. I had NO idea that 3½ years later we’d still be working on this. I’m sure there is a lesson in that for me. I can tell you that each and every member of the 8
J U N E 2 0 1 4 H A R D W O O D M AT T E R S
Since its inception the BRC has listened and responded to many different industry groups. Believe me when I tell you, we had meeting upon meeting upon meeting cussing and discussing what was the right and fair thing to do regarding assessments. Did we get it 100% right, I doubt it, but I know that we did our very best. Presentations have been given to more than 20 state and national association meetings. In November of last year the draft order was published in the Federal Register and comments were solicited. The comment period was extended through the middle of February. There were over 900 comments posted. I can tell you that I personally, and most of the committee members, have read maybe not all but certainly over 850 of these comments. As a result of listening to the feedback given at presentations and reading what people were saying, the BRC made suggestions to the USDA that the order be narrowed to exclude industrials, and only include 3A and better grade lumber. We also asked that the paperwork requirement on exempted small mill owners be removed. I know there were a lot of comments concerning the fact that pre-finished flooring was excluded and unfinished was included. If you’re looking to pin the tail on that donkey, then I’m your man. As I recall, the rationale for not including prefinished was that those in the pre-finish business already invest an inordinate amount of money into developing their brand and putting forth displays. Unfinished flooring, on the other hand, is more generic in nature and once laid, sanded and finished virtually indistinguishable as to the manufacturer. At the very least, since my company only manufacturers unfinished, you certainly can’t say I was prejudiced regarding only assessing unfinished flooring. Although I believe that both unfinished and prefinished will both benefit from promotion, I believe that assessing only unfinished was the fair thing to do. Presently, to the best of my knowledge, it still stands that unfinished is subject to the assessment but that may be changed as we move forward. (There is an example on the back of the handout that shows my interpretation of how the check-off fees apply to an unfinished flooring producer.) As you can see, sales are at $12,650,000 on 5,500,000 square feet and you are allowed to deduct the costs of green and kiln dried lumber that applies to these sales. The green lumber deduction is $5,600,000 and the kiln-dried deductions are $2,200,000. This leaves $4,850,000, which is assessed at 75 cents per $1,000 of sales, so this manufacturer would owe $3,637.50. To put this in perspective, if a load of flooring has 18,000 square feet on it and the total production in this example is 5,500,000 square feet then this equates to W W W. N H L A .CO M