oregon department of forestry state financial viability ... · final – 12/07/2012 page 1 oregon...
TRANSCRIPT
Final–12/07/2012 Page1
Oregon Department of Forestry
State Forest Financial Viability
Work Group Final Report
Executive Summary
This is the final report of a group that was formed to address serious revenue shortfalls to the State
Forests Division and to make recommendations to the agency and the Board of Forestry over time.
Situation
The Oregon Department of Forestry’s State Forests Division manages 821,000 acres of state‐owned
forests, with policy direction derived from state law, the Oregon Constitution, the Board of Forestry and
the State Land Board. These mandates require sustainable production of a range of economic,
environmental and social benefits. The long‐held business model for management of state forests
depends on sustaining operations entirely through timber harvest receipts.
The Department’s State Forests Division – managing both Board of Forestry and Common School lands –
is financially self‐sustaining, with the vast majority of its revenue derived from a portion of timber sale
receipts. Two‐thirds of all revenues from Board of Forestry lands are distributed directly to counties and
the taxing districts where harvests take place. The program receives no General Fund revenues.
The recession that began in late 2007 drove housing starts to near‐record lows nationally, leading to
severely depressed timber values and substantial erosion of the Forest Development Fund (FDF), which
serves both as a savings account and operating fund for the Division. (Board of Forestry lands)
Between 2007 and 2011, the FDF balance dropped by more than half, to $17 million. The balance is
projected to continue to decline and has reached critically low levels – less than six months of Division
operating funds. As of the end of September, 2012 the FDF account balance was $11.6 million and it is
projected to be at $7.8 million by July 1, 2017 (Attachment 1) if corrective actions are not taken.
In response to the downturn, the department responded with the most significant reductions in its
history, laying off 56 positions and curtailing operations across the State Forest Division. Through layoffs
and other cost reduction measures, the Division has reduced expenditures by 30 percent since 2010.
While this has resulted in a more stabilized FDF fund it has significantly diminished investments in
recreation, research and monitoring, forest inventory, silvicultural activities like pre‐commercial
thinning, and other key aspects of forest stewardship.
As the backlog of necessary work and investments grows, the Division is losing its ability to deliver the
outputs required in current forest management plans; to maintain and enhance the forests as an
environmental, economic and social asset for Oregon; and to protect the forests’ capacity to produce
the sustainable benefits Oregonians expect and require, today and into the future.
AGENDA ITEM 2 Attachment 1 Page 1 of 70
Final–12/07/2012 Page2
Implications
The Division faces short‐term as well as long‐term challenges. In addition to lack of capacity to meet the
requirements of forest management plans, current staffing has created workloads that are
unsustainable over time. Increased surveys for threatened species have added costs, as has an extensive
response to recent litigation. In the longer term, the Division faces a significant workload as it strives to
evaluate alternative strategies aimed at improving forest management to enhance economic
performance to the state and the counties while continuing to achieve broad policy goals.
Erosion of the FDF balance has narrowed the cushion necessary to accommodate normal fluctuations in
timber revenue, or to respond to unanticipated events. Projected continued declines in the FDF fund
balance raise the possibility that the Division will be unable to meet its most basic mandates, or to
protect and continue recreation and social investments that are not specifically required by law or
contract, such as Tillamook Forest Center operations and popular recreation activities on State Forest
Lands in Northwest Oregon.
Financial Viability Work Group
The work group, consisting of eight Department managers, was formed in the fall of 2011 to assess the
situation and to explore ideas, develop options, and recommend policies, strategies, and actions to
maintain the Division’s financial viability. The group also explored options for cost reduction and ideas
for revenue enhancement.
Stakeholders representing a broad range of perspectives, along with representatives from the Legislative
Fiscal Office and the Department of Administrative Services formed a stakeholder review group. Board
of Forestry Chair John Blackwell served as Board liaison. A steering committee, consisting of ODF
Division leadership, representation from the Department of State Lands, and the counties has overseen
the effort.
The work group acknowledged and supported continuation of the 30% budget reductions implemented
in 2010, and did not favor additional cost reductions at this point since policy goals and land
management objectives would likely be severely compromised.
In its analysis and search for alternative revenue sources, the work group evaluated many possible
solutions, and noted that some mandated outputs of the state forests, such as diverse fish and wildlife
habitat and older forest structure, do not generate operating revenue. The group determined that
payments for ecosystem services, increased public charges for recreation, revenues from enterprises
such as wind energy generation, General Fund requests and other possibilities merit further exploration.
However, timber receipts are likely to continue to provide the greatest share of revenue, especially in
the short term.
AGENDA ITEM 2 Attachment 1 Page 2 of 70
Final–12/07/2012 Page3
The group reviewed past reorganization and consolidation efforts and concluded that the Division had
realized these savings with limited opportunities for any additional reductions.
Ultimately, the group crafted short‐term and long term recommendations. Short‐term
recommendations are intended to maintain current, constricted budget levels through 2014, by
operating within existing authorities and under current forest management plans. These measures
would keep the Division solvent pending further consideration of changes necessary to maintain long‐
term financial viability. Long‐term recommendations are intended to create a more viable financial
situation for the division, including an adequate FDF fund and fiscal budget levels that allow for
appropriate investments in a range of management activities.
Short‐term recommendations
The group concluded that modest short‐term revenue could be generated within the constraints of
existing policy, increasing the FDF account balance by about 10 percent by July 1, 2013. This would
involve a harvest increase of about 11 percent, to about 245 million board‐feet on BOF lands, the
maximum sustainable harvest levels in currently approved implementation plans.
Achieving the required volume would involve accelerating harvest‐increase phase‐ins contained in the
current plans, and capturing harvest opportunities that have been deferred as part of current strategies.
The group also recommended improved business practices and new marketing strategies to help meet
short‐term financial needs.
Long‐term recommendations
The group set its long‐term objective as achieving the short‐term revenues as outlined above, while
laying the groundwork for sustainable increases in investments. The group concluded that it is not
possible to meet long‐term revenue needs from timber under the current Northwest and Southwest
Oregon Forest Management Plans, the dominant management plans for BOF lands that generate over
90% of the total revenue for the division.
The group solicited and evaluated many concepts for additional revenue, and sorted them into three
categories for further exploration:
Policy, Explore alternatives to the current NW and SW FMPs that will produce increased revenue levels
to the state and the counties at a level that would allow for a healthy FDF fund and budgets that
provided for appropriate investments in the lands. Create a new Board performance measure requiring
financial viability; and investigating land exchange and acquisition policies that would make it easier to
buy and sell properties and capture market opportunities.
Development of a State Forests Division Financial Plan that would include considerations such as
acceptable rates of return for Forest Management Plans and/or silvicultural investments, the adequacy
AGENDA ITEM 2 Attachment 1 Page 3 of 70
Final–12/07/2012 Page4
of a six‐month FDF operating reserve, and developing revenue streams specifically to match expected
expenditures.
Evaluating long‐term alternative revenue options, many of which would require Board, legislative or
other actions. The list of possibilities is long, but includes use of some lands for energy generation or
telecommunication purposes, expanding recreation fees and other means of increasing recreation
revenue, seeking General Funds or Lottery Funds to offset operations, and developing business
sponsorship opportunities and non‐profit State Forest support organizations.
Next steps
Restoring and maintaining the State Forests Division’s financial viability is a complex, ongoing process,
closely related to the other work of the Division, the agency and the Board. The Department plans to
implement many of the short term recommendations and is currently working with the Board of
Forestry on potential policy changes, including exploration of alternative management strategies and
additional Performance Measure improvements. The agency will discuss the final report with the Board
in January, 2013.
AGENDA ITEM 2 Attachment 1 Page 4 of 70
Final–12/07/2012 Page5
Oregon Department of Forestry
State Forest Financial Viability Workgroup
Final Report
The State Forest Financial Viability Workgroup was formed in the fall of 2011 to address current and
predicted serious revenue shortfalls in State Forests and make recommendations to improve short‐ and
long‐term financial viability for the State Forests Division. The workgroup participants are listed in
Attachment 2. This report presents the workgroup’s findings.
Background
The Oregon Department of Forestry (ODF) State Forests Division manages approximately 821,000 acres
of state‐owned forests for two types of ownership. Common School Forest Lands comprise 119,000
acres, are owned by the State Land Board and managed by ODF under an agreement with the
Department of State Lands. For these properties, which are managed to maximize revenue over the
long term, the state management costs are paid from the Common School Fund and revenues are
deposited in that fund.
Board of Forestry lands consist of 702,000 acres of ownership, primarily in NW Oregon. These lands
were in private ownership in the past and were burned over or cut over lands that reverted to the
counties during and after the Great Depression. Counties deeded these lands to the State and retained
an interest in receiving a portion of revenues that are produced from these lands.
On Board of Forestry lands, counties and local taxing districts in which the timber sales are located
receive 63.75% of the net proceeds and ODF receives 36.25%. Monies that are received by the State are
deposited in an operating fund, named the Forest Development Fund (FDF) and are made continuously
available to ODF to manage the Board of Forestry lands. The focus of this report is Board of Forestry
lands and the health of the FDF fund.
The recession that began in late 2007, drove national housing starts to near‐record lows, and depressed
average stumpage values for ODF timber by about one‐third, compared to the previous three years. This
in turn led to substantial erosion of the Forest Development Fund (FDF), which serves both as savings
account and operating fund for the Division. Between 2007 and 2011, the FDF balance dropped by more
than half, to $17 million. The balance as of September 31, 2012 was at $11.6 million, about 40% of the
fiscal budget level. Projections for the FDF balance suggest that it will decline to about $7.8 million in
July of 2017.
Starting in 2010, the demand for export logs to China and Southeast Asia increased. While exports of
unprocessed logs from state land is prohibited, the export market has affected the supply of private
timber for domestic processing and increased demand and prices for ODF timber sold in 2011 and early
2012. More recently the demand and price for export logs to China has reduced. It is uncertain if the
demand for export logs will return to previous high levels. As of November, 2012 national housing starts
have recovered to about the 800,000 level and stumpage prices for state timber sales have increased in
AGENDA ITEM 2 Attachment 1 Page 5 of 70
Final–12/07/2012 Page6
a predictable manner. While recent national trends in new construction look promising, any unexpected
downturn in factors that influence stumpage values will exacerbate the FDF declining fund balance.
Cost Reduction Actions Already Taken. The Division took drastic measures in 2009 and 2010 through
layoffs and other measures to reduce expenditures by 30 percent. This has diminished investments in
recreation, research and monitoring, inventory, young‐stand management and other key aspects of
forest stewardship. As the backlog of necessary work and investments grows, the Division is losing its
ability to deliver the outputs required in current forest management plans; to maintain and enhance the
forests as an environmental, economic and social asset to Oregon; and to protect the forests’ capacity to
produce the sustainable benefits Oregonians expect today and into the future.
Significant district and unit organizational analysis has occurred to determine if there were more
efficient and effective ways to administratively organize the three operational programs of the agency,
such as combining district or unit offices or down grading unit offices to Guard Stations. Other large
scale organizational efforts also included the Tillamook State Forest Reorganization Project and the
Tillamook State Forest Integration Project. The reorganization effort was designed to determine the
feasibility of managing the TSF as one district, while the integration effort focused on increasing
consistency in service delivery. In addition, prior to the significant State Forest reductions in FY2010,
sizable reductions were made in both FY2008 and again in FY2009 as the national financial crisis loomed.
These reductions were also the result of agency‐wide exercises that tactically selected items of relatively
lower priority. At an agency‐level, General Fund reduction exercises from 2000 to date for the Fire
Protection and Private Forest Divisions have also affected the State Forests operating budget by
reallocating fixed costs to State Forests Division.
Division reductions are not sustainable over time. During the last three fiscal years the Division has not
been able to maintain pre‐recession investment levels in recreation, research and monitoring, inventory,
young stand management and other aspects of forest management. These reductions have created a
“backlog” of necessary work and investments that can be postponed but not eliminated. Reduced
staffing levels have created challenging workloads for many employees, a situation that is not likely
sustainable over time. Increased survey requirements for threatened species have also increased
expenditures that affect the financial situation.
AGENDA ITEM 2 Attachment 1 Page 6 of 70
Final–12/07/2012 Page7
State Forests Financial Viability Workgroup
The workgroup was formed in November of 2011. A “charter” was developed which defined workgroup
objectives, policy framework, expected work products and a timeframe for completion (Attachment 4).
Workgroup Policy Assumptions
Short Term. The current statutory and administrative rule framework was used to guide the development of options and recommendations for the short term (2013). This includes current Oregon Revised Statutes (ORS), Greatest Permanent Value (GPV) and Planning administrative rules. Current Forest Management Plans, and timber harvest levels are assumed to follow most recently approved Implementation Plans. Long Term. For options and recommendations that are developed for 2016 and beyond, the workgroup assumed that ORS 530.050, which directs the State Forester to secure the Greatest Permanent Value to the state, and the associated Greatest Permanent Value administrative rule (629‐035‐020) continue to apply. However, some options that include statutory changes or policy changes at the Board or agency were also developed, with the assumption that they would take several years to implement.
Workgroup Objectives
Short term. The near‐term objective is to develop viable options and recommendations for cost reductions and/or revenue increases that can be implemented beginning July 1, 2012 (FY13), including options that could be phased in. The short‐term target is to increase the FDF balance by at least 10% (from current projections) by July 1, 2013 (FY14). Long term. The first long‐term objective is to develop options and recommendations, including policy changes, for cost reductions and revenue increases that will result in a stabilized FDF balance, at a level that considers future uncertainty and risk. The long‐term target is to achieve an FDF balance of at least six months of operating expense by July 1, 2016. This equates to a $13 million balance, with a projection that sustains this level or greater into the future. The second long‐term objective is to develop options and recommendations that over the long‐term will re‐build investments to insure adequate, sustainable operations across all Division functions. To the extent possible, the group sought to provide a cost/benefit estimate for each option. The following process informs the recommendations:
Provide a sensitivity analysis that estimates the amount of necessary timber harvest volume, at varying stumpage values, in order to generate revenues to adequately fund investment levels for Board of Forestry lands.
Based on the sensitivity analysis, analyze and evaluate whether the current NW and SW FMPs are likely to produce timber revenue that will sustain the FDF balance and achieve the desired investment levels associated with rebuilding the program.
The long‐term target is $5 million above FY12 fiscal budget levels. Options were considered within current funding structure and policy direction as well as those that would require a change in policy direction or current funding structure.
AGENDA ITEM 2 Attachment 1 Page 7 of 70
Final–12/07/2012 Page8
Revenue Stream. Provide recommendations to diversify the revenue stream for state forests and recommend a process to explore those revenue opportunities. Identify policy changes that are needed to achieve this objective.
Evaluation of Additional Cost Reduction Measures
The work group stakeholders acknowledged and supported continuation of the 30% budget reductions,
implemented in 2010, but did not favor additional cost reductions since policy goals and land
management objectives would likely be more seriously compromised.
During the last three fiscal years, the State Forests division has not been able to restore any of the pre‐
recession investment levels in recreation, research and monitoring, inventory, young stand management
and other key aspects of forest management.
Over the last decade, ODF has continually faced economic and budgetary challenges in one or more of
its operating programs. During this time, the agency conducted budget reduction and reorganization
exercises almost on an annual basis. Budget reductions in one program have negative implications for
the other programs. This constant financial pressure has ensured that the agency and State Forests
division are lean and efficient, with little room for budget trimming.
Recently, significant district and unit organizational analysis occurred during the preparation for the
State Forests FY2010 reduction process and the Private Forest Division reduction the same year. This
work was performed to determine if there were more efficient and effective ways to administratively
organize the three operational programs of the agency.
Given the cost reduction measures and organizational changes made from 2008‐2010 combined with
the lack of investment in inventory and monitoring, any further reductions would be detrimental to the
State Forests Division’s ability to meet statutory requirements. However, the urgency of the financial
situation called for an exercise to frame the types of cuts that would be necessary and what they would
mean in terms of delivering program objectives if efforts to increase revenue are not successful or if
unforeseen factors created a further decline in revenues.
Implications of Additional Cost Reductions
A basic economic analysis was conducted to determine relative scope and scale of the impacts of any
future expenditure reductions.
Basic assumptions of the analysis included:
Districts and budget units are currently aligned with fiscal budget instructions.
Further reductions beyond current financial status needs to be programmatic and strategic to have lasting effect on FDF balance, such as greater than $1 million, annually.
AGENDA ITEM 2 Attachment 1 Page 8 of 70
Final–12/07/2012 Page9
The NW Forest Management Plan articulates three priority levels of implementation, based on available funding. Plan implementation priorities would change from “minimum activities to achieve social, economic, and environmental benefits…”to only those measures necessary to meet legal and contractual requirements. This change places the focus of expenditure reductions on non‐revenue producing activities not required by law, policy, or contract.
In summary, additional reductions in expenditures would need to come from activities that are not
legally or contractually required. The workgroup analysis and findings (Attachment 3) suggests that $2.5
million in cost savings could be generated by eliminating recreation and interpretation programs in NW
Oregon and by eliminating ODF funding for the South Fork inmate camp. Given the strategic importance
of these programs to achieving the goals of the agency, the workgroup does not recommend these cost
reductions at this time.
Recommendations
Short Term Recommendations:
COST REDUCTIONS ‐ No further cost reduction measures are recommended beyond those already
implemented.
REVENUE ENHANCEMENT ‐The workgroup identified three major revenue generating categories in
meeting the short‐term financial objectives of this charter:
1. Increase Harvest volume within existing policies
2. Improve business practices/functions
3. New marketing strategies
Within these three categories, the workgroup developed recommendations with expected financial
results that meet the revenue needs of the Division for current service levels. These recommendations
have been vetted through the Policy/Steering Committee for further consideration and shared with the
Stakeholder Committee.
The recommendations are projected to generate approximately $1.76 million annually for the next three
years. The majority of this value is related to meeting the midpoint of harvest activities and resulting
timber volume in districts’ Implementation Plans (IP).
AGENDA ITEM 2 Attachment 1 Page 9 of 70
Final–12/07/2012 Page10
Increase Harvest Volume within existing policies
Astoria and Forest Grove District Implementation Plans
The approval of the Astoria and Forest Grove district’s Implementation Plans included a phase‐in
approach which deferred 3 MMBF in Astoria and 1 MMBF in Forest Grove for up to two years.
Approximately 4 MMBF and estimated value of $1 million were deferred in FY2012 Annual Operating
Plans (AOP). Current guidance for FY2013 continues the phase‐in approach. As described in the
approval of the Implementation Plans, there is an opportunity to capture harvest opportunities within
the 10‐year time span of these plans (meeting the Board’s Performance Measure target of a 5 to 15%
revenue increase).
A. Recommendation: The State Forests Financial Viability Workgroup recommends fully
implementing the harvest levels associated with approved Implementation Plans in FY2013
AOP’s to generate immediate revenue and decrease the rate of decline of the FDF. (Note: this
recommendation has been implemented)
B. Recommendation: The workgroup also recommends developing a plan to captured harvest
opportunities deferred in 2012 and 2013 as rapidly as operationally feasible. Approved FY2013
AOP’s for both the Astoria and Forest Grove districts have sufficient volume in alternate sales to
meet the recommended volume objectives. (Note: this recommendation has been
implemented)
Tillamook District Implementation Plan
Between 2005 and 2010, the Tillamook District annual harvest objectives have been as high as 78.7
MMBF and as low as 47 MMBF. Current model runs associated with 2009 Implementation Plan indicate
that sustainable harvest is approximately 47 MMBF. A comparison of planned and sold volumes
indicates a fall‐down in volume accomplishment of approximately 84 MMBF during that five year period.
Table 1. Planned versus Sold Volumes on Tillamook District
Fiscal Year Planned (MMBF) Sold (MMBF) Difference
2006 78.7 75.3 3.4
2007 59.4 39.7 19.7
2008 59.7 44.1 15.6
2009 60.4 21.9 38.5
2010 47.0 40.2 6.8
Total 305.2 221.2 84.0
The current Implementation Plan Annual Harvest Objective of 47 MMBF per year is the sustainable
harvest level of the Tillamook district’s portion of the Tillamook State Forest, and if applied over the 5‐
year period, the target volume for would have been 235 MMBF. In comparing volumes sold to the
AGENDA ITEM 2 Attachment 1 Page 10 of 70
Final–12/07/2012 Page11
current 47 MMBF per year, the district has deferred auctioning 14 MMBF (235 MMBF minus sold
volume of 221 MMBF).
C. Recommendation: The workgroup recommends increasing the Tillamook district Annual
Harvest Objective approximately 3 MMBF per year until the 14 MMBF deferment is offset.
(Note: this recommendation has not been implemented due to uncertainty about the analyses
that calculates sustainable harvest levels)
Improve Business Practices and Functions
The strong operational knowledge of members of the workgroup allowed for a relatively rapid review of all aspects of the timber sale program for potential for volume and value increases within existing timber sale contracts and/or planned timber sales.
The workgroup also discussed results from the Implementation Monitoring Project Report (August 2010) that indicated an over‐achievement of some objectives in the NW Forest Management Plan Landscape Management Strategy 3b: “Residual Live Trees – Retain an average of 5 green trees per acre during regeneration harvest.” The Implementation Monitoring Report results indicated that an average of 17.2 trees per acre were retained on the 53 sampled modified clearcut timber sales. Potential increases to harvest volume associated with exceeding Landscape Management Strategy 3b is not insignificant. It is estimated that an additional 2% of harvest volume could be captured within existing sales or future sales. This 2% percent increase across all State Forests would generate an additional $1 million, annually.
D. Recommendation: Based on this review, the workgroup recommends developing a State Forest
Bulletin that communicates the following: (Note: development of this policy bulletin is
underway).
Focus: Improve internal communication. The emphasis would be that the financial situation has
not sufficiently improved (same status as last two years), spending still exceeds revenue, and
revenue projections still continue slowly downward. There is a continued need to be financially
prudent.
Focus: Timber Sale Planning and Layout. Reinforce leeway within current policy to function at
the higher end of the economic range:
o Where feasible, increase more cost effective operations (modified clearcut vs. partial
cut).
o Remain within requirements for wildlife trees, snags, etc. If green tree retention is met
or exceeded within Appendix J requirements (aquatic and riparian strategies), significant
justification, such as forest health or threatened/endangered species concerns, would
be needed to allow additional wildlife trees).
AGENDA ITEM 2 Attachment 1 Page 11 of 70
Final–12/07/2012 Page12
Focus: Timber Sale Administration. Stress maximizing value on all products related to timber
sales, including continued vigilance on log manufacturing utilization issues. An increased focus
on log utilization and log removal is estimated to generate an additional 1% of harvest volume
within existing sales or future sales. This 1% percent increase across all State Forests would
generate an additional $500,000, annually.
Improved Marketing Strategies
Explore selling log sorts versus timber sales‐ Preliminary analysis suggests that net revenue to
the state and counties could be enhanced by the state selling logs directly to the mill versus
selling timber sales to purchasers who log the sales and deliver logs to the mills. This is a
common practice among many private landowners and some public landowners.
Please see Attachment 8 for complete list of short term recommendations.
Long‐term Recommendations:
These recommendations were developed with the goal of meeting the long‐term need to generate an
additional $5 million per year and aligned with the values used in the “Sensitivity Analysis of Volume
Relationship to Meet Revenue Needs”. The majority of expected value increases is related to policy and
legal options, development of a State Forest Financial Plan, and pursuing alternative revenue streams.
Recommendations were evaluated and prioritized based on alignment with the Greatest Permanent
Value (GPV) rule, but not necessarily constrained by lower hierarchy policy. Recommendations were
categorized into themes with the intent of aligning subjects with the Board of Forestry’s 2012 work plan,
if possible. These recommendations were vetted through the Policy/Steering Committee and shared
with the Stakeholder Committee. Please see Attachment 9 for further detail.
(Attachment 9 – Draft Long Term Options – Workgroup Prioritization)
1. Recommendation: Continue exploration of the priority Long Term Issues for Further
Consideration listed below:
a. Policy – Legal Options
o Explore Forest Management Plan Alternatives for Financial Viability. This item
currently listed in the Board’s work plan for 2012.
o Evaluate potential financial improvement through modification of Board
Performance Measures, with focus on measures s #3 (forest health contributions
including targets of 17 to 20% complex stand conditions in 20 years) and #6 (social
contributions including economic target of a 5 to 15% revenue increase).
o Evaluate potential financial improvement through creation of a new Board
Performance measure requiring financial viability and sustainability of the State
Forest Division. This was completed at the July 2012 Board of Forestry meeting.
AGENDA ITEM 2 Attachment 1 Page 12 of 70
Final–12/07/2012 Page13
o Explore improvements in land exchange and acquisition policies, including ability to
easily consolidate ownerships, capture market opportunities, and purchase and sell
property.
b. Development of a State Forest Division Financial Plan that includes a foundational basis
for business decisions of the program. Currently, there is minimal basis for financial analysis
or comparison of investment choices other than maintaining six months of operating
reserve in the Forest Development Fund. Basic concepts to consider and develop include,
but should not be limited to:
o What is the minimum acceptable Internal Rate of Return (IRR) for long term
investments?
o What is the minimum acceptable Return on Asset Value (ROAV)?
o Is a six‐month FDF reserve sufficient?
o Defining expected expenditures and developing revenue streams to match (similar
to retirement planning).
o How do these concepts influence land acquisition goals or retention of ownership?
o Expectation of alternate revenue streams.
2. Recommendation: Further evaluate long‐term alternative revenue options, while considering
lessons learned from Division of State Lands 2011 Real Estate Asset Management Plan
(discussed on pages 23 and 24), including:
a. Wind energy, energy and telecommunication, and ecosystem services. Currently,
there is not program capacity to thoroughly investigate these potentials. Potential for
significant revenue appears high as the population of Oregon increases, particularly in
energy and telecommunication; however, legislative changes are necessary for the State
Forests Division to commercially capture revenue.
b. Develop a subcommittee to focus on generating revenue for education,
interpretation, and recreation, addressing the following concepts:
o Evaluate recreational fee system similar to Washington DNR.
o Maintaining long‐term funding for law enforcement on State Forests.
o Partnership with Oregon Parks and Recreation Department (OPRD) to help diversify
recreation program funding, and to identify and secure funds.
o Develop an agreement with OPRD to administer and run operations of selected
recreation facilities.
o Investigate business sponsorship opportunities, user sponsorship opportunities, a
recreation license plate, public and private grant funding, state forest‐supporting
non‐profit organizations, establishment of a fee schedule for event permits, and
raising campground fees.
o Continue pursuing Program Option Package for General Fund or Lottery Funds
through legislative budgetary process.
AGENDA ITEM 2 Attachment 1 Page 13 of 70
Final–12/07/2012 Page14
Through the development of the long term recommendations, the workgroup discussed and ultimately
rejected the concept of modifying the statutory revenue distribution to help solve the FDF financial
problems. The Counties, in which the timber sales are located, receive 63.75% of the net proceeds and
ODF receives 36.25%. It did not seem reasonable to pursue this concept given that ODF receives a
higher proportion of revenue when compared to nearby states that have similar types of land. The
counties are also facing economic challenges that are the same or greater than ODF.
Conclusion ‐ This report provides possible solutions to resolve the current and projected revenue
shortfalls for State Forests ‐ Board of Forestry lands. In the short term, harvest levels need to adjust to
the maximum allowed within approved policy and some business practices need to change. In the
longer term, the agency and the Board need to carefully evaluate alternative Management approaches
that would yield higher levels of revenue while still meeting “greatest permanent value” and also pursue
diversification of revenue streams for state forests.
Attachments:
Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Attachment 2 ‐ Financial Viability Workgroup, Stakeholder Involvement and Process
Attachment 3 – Further Cost Reduction Evaluation
Attachment 4 – Financial Viability Workgroup Charter
Attachment 5 – Fund 51 ODF State Forests Financial Summary FY11
Attachment 6 – Cost to Revenue 5Yr Analysis – BOF Cost to Revenue
Attachment 7 – Draft Sensitivity Analysis of Volume Relationship to Meet Revenue Needs
Attachment 8 –– Short Term Options and Financial Benefit
Attachment 9 – Draft Long Term Options – Workgroup Prioritization
Attachment 10– State Forests Financial Viability Stakeholder Meeting Minutes ‐ May 1, 2012
Attachment 11 – State Forests Financial Viability Stakeholder Meeting Minutes – August 14, 2012
Attachment 12 – North Coast State Forest Coalition Letter – May 15, 2012
Attachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
AGENDA ITEM 2 Attachment 1 Page 14 of 70
Final–12/07/2012 Page15 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Attachment 1
Detailed Assessment of Financial Situation and Outlook
Absent decisive action, revenue forecasts predict continuing decline in FDF. Since 2009, revenue
projections for State Forests have indicated that the Forest Development Fund (FDF) balance would
decline to dangerously low levels within a few years and could result in the program going “broke”.
The previously described reductions in personnel and investments from 2008 through 2010 prevented
the initial calamity.
The July 2011 revenue projection (Figure 1) is slightly more optimistic (as the projection line does not
cross $0) than previous projections and reflects a slower pace or erosion of the FDF account, presumably
capturing the export market driven stumpage increases. A later projection January 2012 (Figure 2) also
indicates that the FDF account balance will reach unacceptable levels by July 1, 2013, i.e. drops below a
level that is equivalent to six months of fiscal expenditures. However, this projection indicates a less
precipitous decline of the balance over time, which is a significant change in the projection trend in a
positive direction (or less negative trend).
Most recent revenue projections July 2012 (Figure 3) continue to portray a similar slight downward
trend, with expenditures higher than revenue out to FY16, with one exception in FY14. Log market
influences thought to be minimal as there was little change between these projections. Expenditures
were increased in approved FY13 budgets to address significant multi‐year seedling problems and build
back some capacity to meet legal/policy requirements. This latest projection also indicates that by July
2013 the FDF balance will drop below a level that is equivalent to six months of Division expenditures.
In fact, due in part to normal cycles in cash flow, the FDF account has recently dipped below the six
month operating reserve. This is unacceptable for the Division given the nature of our budget cycles and
processes.
AGENDA ITEM 2 Attachment 1 Page 15 of 70
Final–12/07/2012 Page16 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Figure 1. July 2011 – September 9, 2011
AGENDA ITEM 2 Attachment 1 Page 16 of 70
Final–12/07/2012 Page17 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Figure 2. January 2012
AGENDA ITEM 2 Attachment 1 Page 17 of 70
Final–12/07/2012 Page18 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Figure 3. July 2012 Revenue Projection (Revised September 2012)
AGENDA ITEM 2 Attachment 1 Page 18 of 70
Final–12/07/2012 Page19 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Financial Analyses and Findings
Annual Expenditures
A “money mapping” effort included a review of the State Forest Division fiscal year financial expenditure
summaries (Attachment 5). This tool tracked all expenditures including field unit (districts) costs,
Division Salem costs, and revenue transfers. These revenue transfers are not tracked by fiscal budgeting
process, which can make it difficult to account for total costs at the field level. Revenue transfers for
FY2011 included funds for Protection from Fire Assessment, Agency Administrative Pro‐Rate, Seed
Orchard, and debt management for Salem Headquarters campus construction.
Revenue transfers for FY2011 totaled slightly over $4 million after factoring transfers in from Oregon
Parks and Recreation Department (Off Highway Vehicle funds) and FEMA (storm damage). Revenue
transfers out of the FDF constitute approximately 16% of the Division’s financial liability, although not
technically considered “expenditure.” It is projected that revenue transfers out of the FDF will exceed
$5 million in FY2013.
Table 2. Summary of 2011 Revenue Transfers
TRANSFERS IN DETAIL TRANSFERS OUT DETAIL
Transfers IN YTD Transfers Out YTD
TRANSFER IN‐INTRA AGENCY $‐ Intra Agency $113,427
TRANSFER IN FROM GENERAL FUND $‐ To Div. of State Lands $‐
FROM MILITARY / O.E.M. $237,433
Protection
$1,445,926
FROM PARKS AND RECREATION 1,005,148
Admin ProRate
$2,831,885
FEMA OVERTIME, S&S & AD WAGES $‐ Seed Orchard $210,484
GENERAL FOREST PRODUCTS ‐ FDF $‐ Residual Equity $‐
RECREATION ‐ FDF $‐ COP Interest/(reimbursement) $143,760
STATE FOREST LAND MGMT $‐ COP Principle/(reimbursement) $306,228
VARIOUS DISTRICT TRNS IN $‐
TOTAL TRANSFERS OUT
$5,051,710
TOTAL TRANSFERS IN $1,242,580 TOTAL TRANSFERS OUT
MINUS TRANSFERS IN $3,809,130
See Attachment 1– Fund 51 ODF State Forests Financial Summary FY11 for additional detail.
Table 3 illustrates current expenditures for different programs within the State Forest Division during
fiscal years 2010 and 2011, which are comparable to FY12 and FY13 budgets. Operating expenses to run
the State Forests Division ranged from approximately $18.6 million to $20 million in fiscal years 10 and
11 respectively.
AGENDA ITEM 2 Attachment 1 Page 19 of 70
Final–12/07/2012 Page20 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Table 3 – Forest Development Fund (FUND 5100) expenditures not including revenue transfers.
Expenditure Category Total 5100 FY10 $ % of FY10
Total 5100 FY11 % of FY11
FEMA 509,351 2.7% 620,133 3.1%
General Admin & Planning 6,419,178 34.4% 6,848,846 34.3%
General Forest Products 2,999,260 16.1% 3,162,430 15.8%
Intensive MGMT & Reforestation 3,401,571 18.3% 3,213,465 16.1%
Engineering & Roads 1,077,450 5.8% 1,465,341 7.3%
Social ‐ Recreation 2,617,858 14.0% 2,823,721 14.1%
Research and Monitoring 1,609,184 8.6% 1,852,110 9.3%
Grand Total 18,633,852 100% 19,986,046 100%
Cost to Revenue Analysis
The workgroup completed a Cost to Revenue analysis at the district and Area levels. This analysis used 5
years of data (Attachment 6). Costs include pro‐rated State Forests Salem, area office, Tillamook Forest
Center, and South Fork Camp costs and revenue transfers. All costs are prorated by acreage as well.
Previous assessments were completed on a county basis, per revenue distribution requirements, and did
not allow analysis by district administrative and functional boundaries.
Districts with a 5‐year Cost to Revenue Ratio of 36% or less are considered revenue centers. Conversely,
districts with ratios exceeding 36% are cost centers. This analysis confirmed the general consensus
about the financial productivity of districts, identifying revenue centers as the Astoria, Forest Grove,
North Cascade and West Lane districts. Due to the relatively large size of the Astoria and Forest Grove
districts, contributions from these districts result in the majority of revenue to the FDF.
Table 4. Example of Revenue Center
53 ‐ Forest Grove FY08 FY09 FY10 FY11 FY12 5 Yr AVG
District Expenditures
$3,544,077 $2,891,671 $2,486,418 $3,095,309 $3,096,881 $3,022,871
Prorated Expenditures/Trns
$2,417,417 $2,839,988 $2,123,631 $1,848,667 $2,289,643 $2,303,869
Revenue $29,920,342 $15,772,571 $28,936,095 $23,274,465 $18,656,039 $23,311,902
Total Cost to Revenue Ratio
19.9% 36.3% 15.9% 21.2% 28.9% 22.8%
District Cost to Revenue
11.8% 18.3% 8.6% 13.3% 16.6% 13.0%
Obvious cost centers with no revenue streams, such as the Tillamook Forest Center, South Fork Inmate
Camp, and Seed Orchard were not part of this analysis other than to be included as costs to be prorated
out to the districts. Indirect costs prorate sometimes exceeded annual operation costs of the district, as
was the case for the Tillamook, Grants Pass, and Klamath Lake districts, which indicates that Division
“overhead” cost more than the operational activities in the field.
AGENDA ITEM 2 Attachment 1 Page 20 of 70
Final–12/07/2012 Page21 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Table 5. Example of Cost Center.
51 ‐ Tillamook FY08 FY09 FY10 FY11 FY12 5 Yr AVG
District Expenditures $6,302,546 $5,945,838 $3,948,670 $3,716,070 $3,881,549 $4,758,935
Prorated Expenditures/Trns
$5,363,230 $6,300,737 $4,711,443 $4,101,414 $5,079,566 $5,111,278
Revenue $11,255,511 $12,286,593 $6,361,660 $6,683,511 $7,479,535 $8,813,362
Total Cost to Revenue Ratio
103.6% 99.7% 136.1% 117.0% 119.8% 112.0%
District Cost to Revenue
56.0% 48.4% 62.1% 55.6% 51.9% 54.0%
This analysis is helpful in identifying administrative units with potential to improve financially. However,
with it is important to note that the Division does not have an objective that all districts be revenue
positive. Refer to Attachment 6 – Cost to Revenue 5Yr Analysis – BOF Cost to Revenue for additional
detail.
Benchmarking
Benchmarking Other Land Managers with Different Management Strategies:
A Management Cost analysis was recently conducted by forest consultant group Mason, Bruce, and
Girard, Inc. that reviewed the historic management costs of the BLM western Oregon lands and
compared them with costs for other agencies and the private sector. The agencies included Western
Oregon BLM, Oregon Department of Forestry (State Forests), Washington Department of Natural
Resources, and an average of four large industrial timberland owners.
This bench marking analysis was shared with the State Forest Financial Viability Workgroup. Although
this analysis was performed with a focus on BLM O&C lands, the comparisons of the other types of
landowners (including ODF) provided an insightful third party perspective related to management costs
of the lands and how ODF stacks up with other land managers. Intuitively, the numbers reported align
well with manager investment choices and production/output (MBF, $, etc). Results from this report
also match well with common understandings of management intensities of the different landowners.
Portions of the Management Cost analysis – Attachment E are directly cited in italics. For further
information about the Management Cost analysis, please refer to Attachment 12.
The table 6 below summarizes the cost structure MB&G identified for each agency and a typical
organization in the private sector.
AGENDA ITEM 2 Attachment 1 Page 21 of 70
Final–12/07/2012 Page22 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Table 6. Summary of Cost Structures by Agency/Organization
Organization Op. Expense
Per Acre Under Management
Op. Expense Per Mbf
Harvested or Sold
Timber Program Cost
Per Mbf Harvested or
Sold
Acres Managed Per FTE
Bd.Ft. Harvested or Sold Per Acre
Managed
BLM, Western Oregon $58 $717 $159 2,077 77
Oregon Dept. of Forestry $40 $94 $21 3,500 352
Washington DNR $27 $92 $30 n/a 295
Private Sector $52 $90 $15 10,000 625
“Western Oregon BLM costs are very high when measured on a per‐MBF basis because of high expenses
(NEPA, etc) and very low harvest intensity, measured in terms of board feet harvested per gross acre
managed. Surprisingly, expenditures on a per acre basis are not much higher than in the private sector,
although the types of costs would presumably be dramatically different. Private sector costs are oriented
to a large extent around timber production (getting sales ready for harvest and administering the
harvest as well as maintaining and constructing roads) and silviculture (financially‐optimal investments
in productivity).
Expenditures on a per acre basis for the ODF and DNR are lower than both the BLM and private sector.
This reflects a lower intensity of management compared to the private sector (timber harvest per acre of
about half the private sector) and at the same time, much higher management efficiencies than the BLM.
MB&G state in the report that, “for the purposes of this feasibility analysis, the best cost parameter
would be the operating expense per acre under management.”
The workgroup felt that Board Feet Harvested or Sold per Acre Managed was a more informative metric
for the Financial Viability effort. Viewed from a volume per acre efficiency standpoint, ODF is more cost
effective than either the BLM or WDNR. However, there is a large difference between ODF (352 board
feet/acre) and private sector (625 board feet/acre), meaning that ODF only produces 56% of the
volume/acre of comparable private timberland owners.
These benchmarking results validate the workgroup’s conclusion and recommendation that there is a
need to increase the economic efficiencies of both policy implementation and the current Forest
Management Plans.
Benchmarking – Comparing revenue generated from different types of land:
As part of the larger Financial Viability effort, the workgroup was tasked with providing recommendations regarding viable options to diversify the revenue stream for state forests and recommend a process to explore those revenue opportunities. Although the workgroup did make alternative revenue recommendations, care should be taken to only pursue funding streams that have the real potential to exceed development costs.
A review of the Division of State Lands’ 2011 Real Estate Asset Management Plan (REAMP) revealed that
forestlands were by far the best producers of revenue when compared to their other land uses.
AGENDA ITEM 2 Attachment 1 Page 22 of 70
Final–12/07/2012 Page23 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
The Division of State Lands (DSL) manages 2.8 million acres of lands and waterways, which are
categorized into 7 land classes plus statutory lands. Statutory lands include waterways and original
“trust” lands from the United State of America (Sections 16 and 36 for education purposes). Table 7.
Market Value and Performance by Land Class indicates that forestlands composed only 16% of the total
of market valued lands, but generated 84% of the annual revenue from the lands. Almost all the
revenue derived from forestlands came from timber sales.
DSL also manages for secondary uses within the 4 main land classes and include special uses such
telecom sites, pipeline easements, road right‐of‐way easements, etc. Additional review of statutory
difference between DSL and ODF might better inform potential for improved special use revenue to the
FDF.
A key finding of this report states that, “Forestlands have historically and currently generate the
majority of the Department’s real property asset revenues. Any improvements in efficiency or other
revenue enhancement measures for forestlands would be expected to have significant positive revenue
impacts.”
Table 7. Excerpt from 2011 Division of State Land Real Estate Asset Management Plan
AGENDA ITEM 2 Attachment 1 Page 23 of 70
Final–12/07/2012 Page24 Attachment 1 – Detailed Assessment of Financial Situation and Outlook
Sensitivity Analysis of Volume Relationship to Meet Revenue Needs
A sensitivity analysis was performed that estimates the timber harvest volume that would be necessary, at varying stumpage values, to generate revenues that adequately fund investment levels for Board of Forestry lands. See Attachment 7. This analysis illustrates the relationship between volume and revenue, and estimates of necessary funding. Based on figures from July 2011 revenue projection (Figure 1, approximately $28 million a year will be needed to adequately fund the State Forest Division at its current operational level in FY14 and beyond. For the purposes of this analysis, it was assumed that all revenue sources are through timber harvest, except for existing Oregon Parks and Recreation Department Off‐Highway Vehicle funding. The sensitivity analysis compares the harvest volume (MMBF) and a range of stumpage values ($ per thousand board feet ‐ $/MBF) with the total annual revenue objective. Since the revenue target is static in both the short and long term sensitivity analysis, there is an inverse relationship between volume harvested and stumpage. Short Term (through 2014): Objective is for the Division to generate sufficient revenue to meet current and near term expenditure levels, approximately $28 million per year.
At the current stumpage price of $315/MBF, the volume needed to meet current needs is about 245 MMBF, which is an increase of 20+ MMBF.
At current harvest level (221 MMBF/Year), amount stumpage price would need to increase to meet needs is $350/MBF from $315/MBF.
Key Conclusion: Workgroup concluded that it is possible to meet short term revenue needs within existing policy.
Longer Term: Objective is to meet current revenue needs (outlined above in short term) and increase investments in the forest to a sustainable level (i.e. young stand management, remote sensing, inventory, research & monitoring, etc).
At current stumpage price ($315/MBF), volume needed to meet current and projected needs for the Division to be sustainable is approximately 289 MMBF, which is an increase of 65+ MMBF.
At current harvest levels, the average stumpage price would need to increase to $410/MBF. As shown on the document, this not likely, as the average of the three highest years of the last decade was $360/MBF.
There is a need to add about $5 million in investments that are currently underfunded (monitoring, young stand management, project work, inventory, staff). This $5 million builds back approximately half of $10 million removed from fiscal budgets in FY2010.
Key Conclusion: Workgroup concluded that it is not possible to meet the long term financial viability of the State Forest Division within the current NW and SW Forest Management Plans.
AGENDA ITEM 2 Attachment 1 Page 24 of 70
Final–12/07/2012 Page25 Attachment 2 – Financial Viability Workgroup, Stakeholder Involvement and Process
Attachment 2
Financial Viability Workgroup, Stakeholder Involvement and Process
Financial Viability Workgroup
Members
Dan Goody, District Forester, Tillamook (Chair)
Ed Deblander, Asset Manager, State Forests Division (Vice Chair)
Jim Young, District Manager, Elliot State Forest (Vice Chair)
Kevin Boyd, Quality Control/ Log Accountability
Ron Zilli, ADF – NWOA
Ole Buch, Unit Forester ‐ SOA
Brian Pew, Assistant to the Area Director – EOA
Tina Meyers, Office Assistant, Tillamook
Consulting Members
Randy Peterson, Recreation Program
Jennifer Weikel; Staff Wildlife Biologist
Jill Neely, Fiscal Services
Chris Humcke, Engineering
Mike Kroon, Reforestation
Mark Rasmussen, MB&G – representing the counties
Allan Foutch, Miami Corporation – Land Manager perspective.
Steering/Policy Committee
Mike Bordelon, State Forests Division Chief‐ Chair
Mike Cafferata, State Forests Deputy Division Chief
Dave Lorenz‐ SOA Area Director
Andy White‐ NWOA Area Director
Cliff Liedtke‐ EOA Area Director
Jim Paul, Division of State Lands, Assistant Director
Tim Josi, Tillamook County Commissioner
Satish Upadhyay, Administrative Services Division Chief
Stakeholder Review Committee
John Blackwell, Board of Forestry chair and liaison;
DSL Representative – Jim Paul;
County Representative – Tim Josi;
LFO Representative‐ Susie Jordan/Linda Gilbert;
BAM Representative ‐ Art Ayers;
Governor’s office – TBD;
OFIC – Chris Jarmer;
AOL – Rex Storm;
AGENDA ITEM 2 Attachment 1 Page 25 of 70
Final–12/07/2012 Page26 Attachment 2 – Financial Viability Workgroup, Stakeholder Involvement and Process
Conservation Community representative – Lisa Phipps;
Recreation Community representative – Barrett Brown;
Citizen at Large representative – Ed Kamholz.
Stakeholder Involvement
A Stakeholder meeting convened on May 1, 2012 to review State Forest Financial Viability workgroup
recommendations and offer additional recommendations regarding short and long term cost reductions
and revenue increases that will result in a stabilized Forest Development Fund balance.
The stakeholders reviewed the charter section on Workgroup Objectives, short and long term options, and options/recommendations to re‐build the investment to insure adequate, sustainable operations.
The majority of this meeting was focused on the Short Term recommendations, as time ran out. Please see Attachment 10 – State Forests Financial Viability Stakeholder Meeting Minutes ‐ May 1, 2012 for further detail. An additional Stakeholder meeting has been scheduled for after the July 2012 BOF meeting to more fully vet the long term recommendations. Additional input was solicited and received from several conservation organizations (North Coast
Coalition). Please see Attachment 11 – North Coast State Forest Coalition Letter – May 15, 2012 for
additional detail.
The Stakeholder Committee acknowledged the difficulty of this financial situation and provided positive comments about this approach to solve the problem. Although there was not complete agreement with all of the short term recommendations, there was strong support for the quality of the work.
Some focus points provided by the Stakeholder Committee:
a. Good ideas, but focus on the “big rocks”.
b. Right now we are looking at only the harvest and economic needs but we aren’t evaluating it
against the other uses that the state forest is managed for.
c. Review and assess WDNR public recreation access fee system. Perform this action as part of the
benchmarking of other agencies and forest landowners in long term actions.
d. Potential adjustments to existing IP’s, is the best, most viable option. It’s not that the other recommendations won’t generate revenue, but in the immediate (2‐3 years), IP’s will add the most revenue. Sale planning and administration improvements could also add some revenue.
e. Good ideas, but it seems like the workgroup focused on operational questions. The big questions are: Does the forest plan represent a sustainable business model? It would be good to clarify how the money gets spent, for instance, how much money does it cost to support the Board of Forestry?
f. Thought most of the ideas are worthwhile, it will take 24 months to see the revenue increase. This is not a good time to make acquisitions (you are buying a liability), such as the Gilchrest forest, or to invest in those acquisitions.
AGENDA ITEM 2 Attachment 1 Page 26 of 70
Final–12/07/2012 Page27 Attachment 2 – Financial Viability Workgroup, Stakeholder Involvement and Process
Process for Generating Ideas with Workgroup and Stakeholders
The Workgroup initiated a request for suggestions, concepts, and other ideas for improving the financial
viability of the State Forest Division from all State Forest districts and Salem Staff. In addition, the
workgroup resurrected and reviewed work performed by the Revenue Generation Charter from 2009.
That previous effort focused a very tactical level of increasing revenue to help mitigate the immediate
financial crisis created by the Great Recession prior to significant budget reductions and layoffs in
FY2010.
Prior to compiling the enormous amount of suggestions and concepts, a set of methodologies were
developed to disposition each concept and develop themes. This effort resulted in a process for
determining short and long term issues, and assesses risks and benefits related to each concept.
The workgroup compiled all of the information into multiple categories:
Out‐of‐scope of the charter. Example – Suggestion to not manage for recreation on State
Forests was considered outside of Greatest Permanent Value rule. Items in this category were
not considered by the workgroup and removed from the list.
Process improvements or other efficiency suggestions within current managerial or
procurement policies considered normal prudence of program management. Example –
Suggestion to reduce vehicle fleet or vehicle maintenance schedules at district level to meet
existing need of workforce and motor‐pool is considered part of expected managerial
performance. Items in this category were captured in a separate list for feedback to districts and
SF Division.
Process improvements or other efficiency suggestions not clearly defined or understood in
policy or program and/or agency management. Example – Question of equity in operational
program funding of cross program funded positions or support functions. Items in this category
have been captured in a separate list and forwarded to appropriate agency managers for further
assessment.
Short Term Objectives – Potential financial improvement within existing policies aligned with
meeting charter objective of increasing FDF account by 10% by beginning of FY14. (See
Attachment 8).
o Within the short and long term categories, items were further categorized into themes,
i.e. Determine potential to add more harvestable volume within existing policies (short
term) and Alternate Revenue Potential (long term).
Long Term Issues – Potential financial improvement within the confines of the GPV rule aligned
with (See Attachment 9).
AGENDA ITEM 2 Attachment 1 Page 27 of 70
Final–12/07/2012 Page28 Attachment 3 – Further Cost Reduction Evaluation
Attachment 3
Further Cost Reduction Evaluation
Materials reviewed in this analysis included Northwest Oregon Area Fiscal 2012 and 2013 District/Unit
Budgets and State Forest Division FY12 Expenditures by activity type (forest products, engineering,
recreation, reforestation, etc).
Initial Findings from Further Cost Reduction Evaluation:
The North Cascade and West Oregon districts are currently funded at base levels to meet legal/policy requirements. Any additional reductions would preclude these districts from meeting legal and policy requirements.
The Astoria, Forest Grove, and Tillamook districts are currently funded at base levels to meet legal/policy requirements for marketing, reforestation, and engineering activities. In this analysis, the large social investments in recreation in these districts were considered outside of the legally and contractually required activities.
o Recreation funds budgeted from FDF for the three districts are approximately $1 million.
o Reduction of all FDF‐funded recreation activities would result in about $800,000 per year in savings. Approximately $200,000 per year is needed for risk management of existing facilities and for minimal maintenance.
The entire budget unit of the Tillamook Forest Center was considered outside of the legally and contractually required activities. The FDF portion of the Tillamook Forest Center’s FY2013 Budget is $900,000.
o Reduction of all FDF‐funded education and interpretation activities would result in about $700,000 in savings. Approximately $200,000 per year is needed for risk management of existing facilities and for minimal maintenance.
o Acknowledgement that FDF dollars are leveraged with funds from OPRD and Tillamook Forest Heritage Trust.
The South Fork Inmate Camp does provide services that are legally required, but may not do so in the most cost effective manner. The FDF portion of South Fork’s FY2013 Budget is $2.2 million.
o A reduction of recreation management activities translates to a decreased need in number of crews.
o Rather than staff 10 to 12 crews year round for firefighting at South Fork, the Division could meet the legal measure of fire protection through contract crews, as other large industrial forestland owners do. Costs to FDF are minimal, as the majority of fire assignments within the Area are not on state forestland.
o Utilization of contract crews for all reforestation and young stand management activities would cost approximately $1 million per year.
o Reduction of all FDF‐funded South Fork activities would result in about $1 million per year in savings. Again, about $200,000 per year would be needed for risk management for existing facilities and minimal maintenance.
AGENDA ITEM 2 Attachment 1 Page 28 of 70
Final–12/07/2012 Page29 Attachment 3 – Further Cost Reduction Evaluation
The total possible expenditure reduction by shifting Forest Management Plan implementation priorities
savings is about $2.5 million per year, which is approximately 10% of total FDF annual expenditure. A
review of the Division FY12 expenditures confirms that approximately $2.7 million was spent on the
suite of social programs and aligns fairly well with numbers from fiscal budgets. These cost reductions
are not recommended by the workgroup.
AGENDA ITEM 2 Attachment 1 Page 29 of 70
2 | P a g e S t a t e F o r e s t s F i n a n c i a l V i a b i l i t y C h a r t e r
Attachment 4 – Financial Viability Workgroup Charter
Background
Since 2007 the account balance in the Forest Development Fund has dropped from about $40million to
about $17 million in July, 2011. Based on recent Revenue Projections, the FDF fund balance is projected
to continue to decline to critically low levels by 2013.
As a result of the national economic recession, which started in 2008, housing starts in the U.S. have
dropped significantly to near record low levels. Concurrently, average stumpage values for ODF timber
have decreased by about one‐third when compared to the previous three years. In addition to
reductions in timber prices, ODF harvest levels have remained stable or declined to align with improved
information and policy decisions.
Timber markets are very uncertain
Starting in about 2010, the demand for export logs to China and Southeast Asia has increased. While
the State is prohibited from exporting unprocessed logs from State land, the export market has affected
the supply of private timber for domestic processing and created greater demand and improved prices
for ODF timber sold in late 2010 and 2011. It is uncertain if the increased demand for export logs will
continue over time. Projections for U.S. housing starts are uncertain but these projections suggest that
it will be several years before housing starts return to average pre‐recession levels. Any negative
downturn in these factors will greatly accelerate the declining fund balance.
Division reductions are not sustainable over time.
As a result of the decline in timber markets, decreased revenue and projections that indicated slow
recovery of timber prices, the Division took action to reduce expenditures starting in FY10. These
reductions, of about $10 million (30%), resulted in a reduction in staffing (layoffs) and expenditure
reductions across most functions of the program. During the last three fiscal years the Division has not
been able to maintain pre‐recession investment levels in recreation, research and monitoring, inventory,
young stand management and other key aspects of forest management. In addition these reduction
actions have created a “backlog” of necessary work and investments that can be postponed but not
eliminated (i.e. inventory, pre‐commercial thinning, research and monitoring). Reduced staffing levels
have created challenging workloads for many employees, a situation that is not likely sustainable over
time. Increased surveys for threatened species have also added additional costs that affect the financial
situation. In addition, the management of Common School Forest Lands is not meeting revenue or
cost/revenue targets.
Performance
1) Board of Forestry Lands must be self‐supporting; and 2) The State Land Board Key Performance
Measure ( KPM) #2 has a cost/revenue target of 36% for Common School Forestlands.
State Forests (both Board of Forestry and State Land Board lands) are financially self‐supporting. For
Board of Forestry Lands, about 98% of the total revenues are produced by timber sales. The Counties, in
which the timber sales are located, receive 63.75% of the net proceeds and ODF receives 36.25%. While
AGENDA ITEM 2 Attachment 1 Page 30 of 70
3 | P a g e S t a t e F o r e s t s F i n a n c i a l V i a b i l i t y C h a r t e r
Attachment 4 – Financial Viability Workgroup Charter
other sources of revenue, like carbon credits, ecosystem services and recreational fees may be possible
in the future, these markets are uncertain and are not projected to be significant income sources for
some time. On Board of Forestry Lands in the Clatsop and Tillamook State Forests the agency is not well
positioned to achieve the Board’s Performance Measure target of a 5‐15% increase in revenue (harvest
volume proxy) within the next 10 years, and to sustain that increase over time.
On the State Land Board lands, the department has met the 36% cost/revenue target Common School
Forestlands in only one of the last six years (2009), and 2006 was the most recent year the target was
met when considering a five‐year rolling average. This under‐ achievement of cost/revenue targets is
due to a variety of factors including declining timber markets, semi‐ fixed indirect costs and the
scattered nature of common school forest lands that are outside the Elliot State Forest. Recent revisions
in the Elliot Forest Management plan are expected to increase harvest levels and positively influence the
cost/revenue measure on the Elliot State Forest.
Revenue forecasts predict decline
Since 2009, revenue projections for State Forests have indicated that the Forest Development Fund
(FDF) balance would decline to dangerously low levels within a few years and could result in the
program going “broke”. The July 2011 revenue projection (attached) is slightly more optimistic and
reflects a slower pace or erosion of the FDF account, presumably capturing the export market driven
stumpage increases. However, this latest projection also indicates that the FDF account balance will
reach unacceptable levels by July 1, 2013, i.e. drops below a level that is equivalent to six months of
fiscal expenditures. (Attachment 1 – ODF Share Revenue Projection dated 9/29/2011)
Recent Trends
Given the recent and current financial situation and the projected erosion of the FDF fund over the next
few years, it is timely and important to initiate a workgroup to focus on developing options to insure
that ODF can remain financially viable and re‐build important investments in State Forests. This
workgroup in conjunction with county and external stakeholder involvement and review will develop
policy, strategic and operational options and recommendations to ensure ODF state forests remains
financially viable while meeting Board expectations and cost/revenue targets of DSL.
AGENDA ITEM 2 Attachment 1 Page 31 of 70
4 | P a g e S t a t e F o r e s t s F i n a n c i a l V i a b i l i t y C h a r t e r
Attachment 4 – Financial Viability Workgroup Charter
Principles
1. Strive to do our best job to efficiently and effectively achieve the land management and policy
objectives, on behalf of the citizens of Oregon.
2. ODF employees are vitally important to insure program success over time. Options and
recommendations developed by the workgroup will strive to minimize and mitigate impacts on
ODF employees while recognizing the need to align with the first principle.
3. The workgroup process should be conducted in an open and transparent manner, to include
timely internal and external communication and the involvement of counties and external
stakeholders and expertise, as needed.
4. The Agency is committed to continuous improvement efforts in all aspects of its work.
Assumptions
As a starting point, the July, 2011 Revenue projection represents the best knowledge about
costs, revenues and the FDF fund balance for the Division (Attachment 1).
Information provided in the 2011 report to the Department of State Lands contains accurate up‐
to date information on the cost/revenue metric for CSFL. Revenue projections are expected to
change during the course of this project, but the magnitude of the change is not expected to be
significant (up or down).
The State Forests Division recognizes that improvements can be made to improve efficiency and
effectiveness.
Policy Framework
Short Term‐ The current statutory and administrative rule framework should be used to guide the development of options and recommendations for the short term (2013), i.e. current ORS, GPV and Planning administrative rules, current Forest Management Plans.
o For Board of Forestry lands, timber harvest levels are assumed to follow most recently approved Implementation Plans. Harvest Levels for CSFL are assumed to include implementation of the 2011 Elliot Forest Management Plan.
Longer Term‐ For options and recommendations that are developed for the “longer term” (2016 and beyond), the workgroup should assume that ORS 530.050 which directs the State Forester to secure the greatest permanent value to the state, the associated Greatest Permanent Value administrative rule (629‐035‐020) and the constitutional direction for CSFL will remain unchanged . The workgroup can consider options that include other statutory changes or policy changes at the Board or agency level, with a recognition that significant adjustments in policy can take several years to implement.
AGENDA ITEM 2 Attachment 1 Page 32 of 70
5 | P a g e S t a t e F o r e s t s F i n a n c i a l V i a b i l i t y C h a r t e r
Attachment 4 – Financial Viability Workgroup Charter
o For Board of Forestry Lands harvest levels will depend on the policy direction for Board
of Forestry lands, which could be influenced by the recommendations from the workgroup.
Workgroup Objectives
1. Shorter term‐ Develop viable options and recommendations for cost reductions and/or revenue increases that can be implemented beginning July 1, 2012 (FY13) including options to be phased in over time.
a. Target‐ Increase the FDF balance by at least 10% (from current projections) by July 1, 2013 (FY14), and that contribute positively to improving cost/revenue goals on CSF lands.
b. Develop a plan to address cost/revenue issues on Common School Forest Land by June, 2012.
2. Longer term ‐ Develop options and recommendations, including policy changes for cost reductions and revenue increases that will result in a stabilized FDF balance, at a level that considers future uncertainty and risk, and can meet DSL’s cost/revenue targets and Board of Forestry revenue expectations.
a. Target‐ FDF balance of at least a six month operating expense on July 1, 2016, i.e. $13 million with a projection that sustains this level or greater into the future.
3. Develop options and recommendations to re‐build the investment level in key functions to insure adequate, sustainable operations across all functions. To the extent possible, provide a cost/benefit estimate for each option.
a. Provide a sensitivity analysis that estimates the amount of timber harvest volume that would need to be produced with varying stumpage values in order to generate revenues to adequately fund investment levels for Board of Forestry lands.
b. Based on (a) above, analyze and evaluate whether the current NW and SW FMPs are likely to produce timber revenue that will sustain the FDF fund balance and achieve the desired investment levels associate with rebuilding the program.
c. Target‐ $5 million above FY12 fiscal budget levels
i. Within current funding structure and policy direction ii. Options that would require a change in policy direction or current funding
structure
AGENDA ITEM 2 Attachment 1 Page 33 of 70
6 | P a g e S t a t e F o r e s t s F i n a n c i a l V i a b i l i t y C h a r t e r
Attachment 4 – Financial Viability Workgroup Charter
4. Provide recommendations regarding viable options to diversify the revenue stream for state forests and recommend a process to explore those revenue opportunities.
a. Identify policy changes that are needed to achieve this objective.
5. Develop a communications plan to insure transparency and good communication within ODF and with the counties, stakeholders and other interested parties.
Deliverables
Product Timeline To Whom Policy Framework
Plan to address cost/revenue targets for CSFL:
Cost reductions
Efficiency measures
Revenue enhancements
Land exchanges
June 2012 Steering committee
DSL
SLB (annual report)
Within current policy
DSL Asset Management Plan
Interim Report for short‐term options/recommendations:
Cost reduction measures
Efficiency measures
Revenue (net) enhancements
Sensitivity analysis (volume/value)
Analyze financial viability of current NW and SW FMPs
May 2012 Steering Committee
SF fiscal budget workgroup
FTLAC
Stakeholder review group
BOF (inform)
Within current policy
Final Report
Indentify options and recommendations to provide: o Stabilized FDF fund balance o Rebuild investment levels
(BOF) o Reference the Plan to address
cost/revenue – CSFL o Achieve BOF Performance
Measures (economic) o Revenue diversification
November 2012
Steering committee
Stakeholder review group
FTLAC
BOF
ORS 530.050 and OAR 629‐035‐020
CSFL constitutional mandates
Organization /Governance Steering/ Policy Committee Role‐ Set strategic direction and provide on‐going guidance and support to the workgroup. Discuss and evaluate policy changes that should move forward to the stakeholder review group and Board of Forestry.
AGENDA ITEM 2 Attachment 1 Page 34 of 70
7 | P a g e S t a t e F o r e s t s F i n a n c i a l V i a b i l i t y C h a r t e r
Attachment 4 – Financial Viability Workgroup Charter
Mike Bordelon, State Forests Division Chief‐ Chair Mike Cafferata, State Forests Deputy Division Chief Dave Lorenz‐ SOA‐ Area Directors Andy White‐ NWOA Area Director Cliff Liedke‐ EOA Area Director Jim Paul, Division of State Lands, Assistant Director Tim Josi, Tillamook County Commissioner Satish Upadhyay, Administrative Services Division Chief Financial Viability Workgroup Role‐ Meet the objectives in the charter Chair ‐ Dan Goody, District Forester, Tillamook Vice Chair‐ Ed Deblander, Asset Manager, State Forests Division Vice Chair‐ Jim Young, District Manager, Elliot State Forest Member‐ Kevin Boyd ‐ Quality Control/ Log Accountability Member‐ ADF‐NWOA‐ Ron Zilli Member‐Unit Forester SOA ‐ Ole Buch Member‐ Assistant to the Area Director ‐ EOA Brain Pew Committee Administrator‐ Tina Meyers Consulting Members* Recreation Program ‐ Randy Peterson Staff Specialist‐ Jennifer Weikel ODF‐ Fiscal Services‐ Jill Neely ODF Economist (vacant) Engineering‐ Chris Humpke Reforestation‐ Mike Kroon Mark Rasmussen, MB&G – representing the counties Other consulting members from within or outside the agency, as determined by workgroup Chair. *Consulting members will receive all meeting summaries from the workgroup and will directly participate as needed.
Stakeholder Review Committee Role ‐ Provide a sounding board for options and recommendations, and a social/political filter for the potential policy options and recommendations that are generated by the workgroup or steering committee. Board of Forestry liaison – John Blackwell DSL Representative – Jim Paul
AGENDA ITEM 2 Attachment 1 Page 35 of 70
8 | P a g e S t a t e F o r e s t s F i n a n c i a l V i a b i l i t y C h a r t e r
Attachment 4 – Financial Viability Workgroup Charter
County Representative – Tim Josi LFO Representative‐ Susie Jordan/Linda Gilbert BAM Representative‐ Art Ayers Governor’s office ‐ TBD OFIC – Chris Jarmer AOL – Rex Storm Conservation Community representative – Lisa Phipps Recreation Community representative – Barrett Brown Citizen at Large representative – Ed Kamholz ODF Staff‐ Mike Bordelon, Division Chief, State Forests Mike Cafferata, Deputy Division Chief, State Forests Satish Upadhyay, Division Chief, Administrative Services Dan Goody, Chair, workgroup General Timeframe and Process Convene workgroup ‐ November, 2011 Workgroup Meetings/ Meeting summaries with status reports to Steering Committee‐ Monthly External Review Group Meeting‐ Convene as needed to review progress and to provide advice. For planning purposes ‐ quarterly meetings Interim Report for Short term options and Recommendations ‐ May, 2012. Implementation opportunity for recommendations: July 1, 2012. Final report to include short and long term options and recommendations ‐ November, 2012. State Forests Division develops next steps to implement recommendations.
AGENDA ITEM 2 Attachment 1 Page 36 of 70
FUND 51 ODF STATE FORESTS FINANCIAL SUMMARY FY11 SFFV FINAL REPORT ATTACHMENT NO. 5See Comment
56.2%
FISCAL YEAR TIME ELAPSED 100.0% EXPENDITURES/TRANSFERS SUMMARY 5100 100.0%
BIENNIAL TIME
ELAPSED
ay adj for fy12 placeholder row
NOTE 5100 Jul‐10 Aug‐10 Sep‐10 Oct‐10 Nov‐10 Dec‐10 Jan‐11 Feb‐11 Mar‐11 Apr‐11 May‐11 Jun‐11 Mo 13‐11 YTD
PS $1,064,706 $1,068,476 $1,100,280 $1,085,546 $1,026,536 $1,062,042 $1,068,540 $1,080,497 $1,054,500 $1,059,463 $1,026,044 $978,711 ($8,046) $12,667,296 PS
SS $425,161 $820,184 $687,650 $510,478 $449,332 $314,692 $623,076 $311,733 $735,258 $482,760 $676,192 $916,511 $211,235 $7,164,263 SS
CO $0 $0 $0 $0 $773 $5,710 $583 $37,217 $0 $0 ($2,815) $93,096 $0 $134,565 CO
OTHER $0 ($814) $0 ($1,355) $0 $0 ($4,871) $0 $0 $0 $0 $0 $0 ($7,040) OTHER
SPECIAL PAYMENTS (PROVIDE COMMENT) $0 $0 $0 $0 $0 $26,963 $0 $0 $0 $0 $0 $0 $0 $26,963 SPECIAL PYMTS
SUB TOTAL FY EXPENDITURES W/O AY CLOSE $1,489,867 $1,887,847 $1,787,930 $1,594,668 $1,476,642 $1,409,407 $10,134,658 PROJECT WK CREDITS
TOTAL 5100 EXPENDITURES $1,489,867 $1,887,847 $1,787,930 $1,594,668 $1,476,642 $1,409,407 $1,687,328 $1,429,447 $1,789,758 $1,542,223 $1,699,421 $1,988,318 $203,189 $19,986,046DOES NOT INCLUDE PROJECT
CREDITS
$38,619,904
$20,918,799 $4,019,000 $18,331,000 $68,736,839
FY11 Budget $$ Fund 51 FY11 Estimated Transfers FY11 ODF Share Revenue Projection (July
2010)UPDATED THROUGH MONTH 13 BIENNIAL BUDGET 09‐11
EXPENDITURES YTD CUMULATIVE $1,489,867 $3,377,714 $5,165,644 $6,760,312 $8,236,954 $9,646,361 $11,333,689 $12,763,136 $14,552,894 $16,095,117 $17,794,539 $19,782,857 $19,986,046 95.5%$30,120,704
% of Budget Allowance 7.1% 16.1% 24.7% 32.3% 39.4% 46.1% 54.2% 61.0% 69.6% 76.9% 85.1% 94.6% 95.5% WITHIN BUDGET
NOTE GROSS 51 REVENUE $6,178,945 $6,089,921 $5,796,030 $4,244,171 $3,729,039 $2,604,437 $4,601,215 $5,298,341 $5,308,275 $4,847,097 $5,951,475 $5,302,687 $151,936 $60,103,566DOES NOT INCLUDE PROJECT
CREDITS
TOTAL 5100 REVENUE (BOF SHARE) $2,239,868 $2,207,596 $2,101,061 $1,538,512 $1,351,777 $944,108 $1,667,940 $1,920,649 $1,924,250 $1,757,073 $2,157,410 $1,922,224 $55,077 $21,787,543$60,103,566
BOF SHARE REVENUE YTD PROGRESSIVE $2,239,868 $4,447,464 $6,548,524 $8,087,036 $9,438,813 $10,382,922 $12,050,862 $13,971,510 $15,895,760 $17,652,833 $19,810,242 $21,732,466 $21,787,543 118.9%
% FY11 ODF Share Revenue Projection 12.2% 24.3% 35.7% 44.1% 51.5% 56.6% 65.7% 76.2% 86.7% 96.3% 108.1% 118.6% 118.9%IN RELATION TO REV
PROJ
NOTE TOTAL TRANSFERS OUT $0 $2,831,885 $0 $442,018 $0 $1,445,926 $0 $24,510 $9,027 $250,446 $15,359 $20,593 $11,947 $5,051,710
NOTE TOTAL TRANSFERS IN $22,507 $397,288 ($10,300) $102,997 $30,180 $0 ($0) $17,173 $54,547 $27,548 $1 $0 $600,639 $1,242,580
/w/Proj wk cr trns
NET TRANSFERS (trns out ‐ trns in) ($22,507) $2,412,089 $2,422,389 $2,761,411 $2,731,230 $4,177,156 $4,177,156 $4,184,494 $4,138,974 $4,361,871 $4,377,230 $4,397,822 $3,809,130 $3,809,130 $13,943,787
1‐Jul‐09 1‐Aug‐09 1‐Sep‐09 2‐Oct‐09 2‐Nov‐09 3‐Dec‐09 3‐Jan‐10 3‐Feb‐10 6‐Mar‐10 6‐Apr‐10 7‐May‐10 7‐Jun‐10 2010 MO 13 FY 2010 TOTAL
PS $1,021,866 $1,072,304 $1,015,365 $1,054,499 $1,076,117 $1,001,912 $1,019,669 $1,062,433 $995,878 $971,191 $1,008,874 $1,080,488 $2,486 $12,383,082 PS
SS $287,738 $376,560 $915,781 $393,616 $376,533 $287,820 $348,035 $284,471 $776,808 $615,843 $569,162 $598,761 $327,197 $6,158,325 SS
CO $0 $18,500 $41,424 $31,494 $0 $0 $335 $0 $12 $686 $0 $0 $0 $92,451 CO
OTHER $0 OTHER
SPECIAL PAYMENTS (PROVIDE COMMENT) $0 SPECIAL PYMTS
TOTAL FY10 EXPENDITURES $1,309,604 $1,467,364 $1,972,570 $1,479,609 $1,452,650 $1,289,732 $1,368,039 $1,346,904 $1,772,698 $1,587,720 $1,578,036 $1,679,249 $329,683 $18,633,858$18,633,858
% DIFF BETWEEN FY11 AND FY10 ‐12.1% ‐22.3% 10.3% ‐7.2% ‐1.6% ‐8.5% ‐18.9% ‐5.8% ‐1.0% 3.0% ‐7.1% ‐15.5% 62.3% ‐6.8%
FY2010 EXPENDITURES FUND 51 (COMPARISON)
DATA SOURCE: BRIO reports, Sale Plan, Revenue Projection, Budget Summary
DEVELOPED AND MAINTAINED BY: KELLY BROWN, STATE FORESTS, ASSET MANAGEMENT UNIT
Attachment 5 - Fund 51 ODF State Forests Financial Summary FY11AGENDA ITEM 2 Attachment 1 Page 37 of 70
AGENDA ITEM 2 Attachment 1 Page 38 of 70
AGENDA ITEM 2 Attachment 1 Page 39 of 70
SF Financial Viability WorkgroupSensitivity Analysis of Volume Relationship to Meet Revenue Needs
Long TermExpected Total Expenditures FY13+ (base) $28,000,000 Anticipated average annual expenditures for next 2 ‐ 3 years at base budget.
Required FDF Reserve $14,000,000Expected FDF Reserve Gap FY14 $1,300,000 One time increase to FDF to maintain current 6 month reserve. Not included in calculations.
Additional Investments $5,000,000 Deferred maintenance (i.e. monitoring, young stand mgt, project work, inventory, lidar, etc)
Expected Annual Revenue Needs $33,000,000with one‐time restoration of Reserve
Stumpage Revenue Volume$/MBF Distrib % Required MBF MMBF
Expected Annual Revenue Needs $33,000,000 $200 $73 455,172 455$33,000,000 $210 $76 433,498 433$33,000,000 $220 $80 413,793 414$33,000,000 $230 $83 395,802 396$33,000,000 $240 $87 379,310 379$33,000,000 $250 $91 364,138 364$33,000,000 $260 $94 350,133 350$33,000,000 $270 $98 337,165 337$33,000,000 $280 $102 325,123 325$33,000,000 $290 $105 313,912 314$33,000,000 $300 $109 303,448 303$33,000,000 $310 $112 293,660 294
Close to current stumpage ($315/MBF) $33,000,000 $315 $114 288,998 289$33,000,000 $320 $116 284,483 284$33,000,000 $330 $120 275,862 276 Volume gap at current stumpage
$33 000 000 $340 $123 267 748 268 between current volume and
Oregon Department of Forestry 07/19/2012 Page 1
$33,000,000 $340 $123 267,748 268 between current volume and
$33,000,000 $350 $127 260,099 260 volume to meet projected needs.
$33,000,000 $360 $131 252,874 253 This is outside sideboards
$33,000,000 $370 $134 246,039 246 of existing FMP.
$33,000,000 $380 $138 239,564 240$33,000,000 $390 $141 233,422 233$33,000,000 $400 $145 227,586 228
Close to current BOF total (224 MMBF) $33,000,000 $410 $149 222,035 222$33,000,000 $420 $152 216,749 217$33,000,000 $430 $156 211,708 212$33,000,000 $440 $160 206,897 207$33,000,000 $450 $163 202,299 202$33,000,000 $460 $167 197,901 198$33,000,000 $470 $170 193,690 194$33,000,000 $480 $174 189,655 190$33,000,000 $490 $178 185,785 186$33,000,000 $500 $181 182,069 182$33,000,000 $510 $185 178,499 178
At current harvest level, average stumpage price has to increase to 410 $/MBF. This is unlikely. Average over good markets of 05,06,07 was $360/MBF.
Oregon Department of Forestry 07/19/2012 Page 1AGENDA ITEM 2 Attachment 1 Page 40 of 70
SF Financial Viability WorkgroupSensitivity Analysis of Volume Relationship to Meet Revenue Needs
Short TermExpected Total Expenditures FY13+ (base) $28,000,000 Anticipated average annual expenditures for next 2 ‐ 3 years at base budget.
Required FDF Reserve $14,000,000Expected FDF Reserve Gap FY14 $1,300,000 One time increase to FDF to maintain current 6 month reserve. Not included in calculations.
Additional InvestmentsExpected Annual Revenue Needs $28,000,000with one‐time restoration of Reserve
Stumpage Revenue Volume$/MBF Distrib % Required MBF MMBF
Current Annual Revenue Needs $28,000,000 $200 $73 386,207 386$28,000,000 $210 $76 367,816 368$28,000,000 $220 $80 351,097 351$28,000,000 $230 $83 335,832 336$28,000,000 $240 $87 321,839 322$28,000,000 $250 $91 308,966 309$28,000,000 $260 $94 297,082 297$28,000,000 $270 $98 286,079 286$28,000,000 $280 $102 275,862 276$28,000,000 $290 $105 266,350 266$28,000,000 $300 $109 257,471 257$28,000,000 $310 $112 249,166 249
Close to current stumpage ($315/MBF) $28,000,000 $315 $114 245,211 245 Need to harvest about 20 MMBF
$28,000,000 $320 $116 241,379 241 more match revenue with
$28,000,000 $330 $120 234,065 234 current annual expenditures.
$28 000 000 $340 $123 227 181 227 May be within current FMP
Oregon Department of Forestry 07/19/2012 Page 1
$28,000,000 $340 $123 227,181 227 May be within current FMP.
Close to current BOF total (224 MMBF) $28,000,000 $350 $127 220,690 221$28,000,000 $360 $131 214,559 215$28,000,000 $370 $134 208,760 209$28,000,000 $380 $138 203,267 203$28,000,000 $390 $141 198,055 198$28,000,000 $400 $145 193,103 193$28,000,000 $410 $149 188,394 188$28,000,000 $420 $152 183,908 184$28,000,000 $430 $156 179,631 180$28,000,000 $440 $160 175,549 176$28,000,000 $450 $163 171,648 172$28,000,000 $460 $167 167,916 168$28,000,000 $470 $170 164,343 164$28,000,000 $480 $174 160,920 161$28,000,000 $490 $178 157,635 158$28,000,000 $500 $181 154,483 154$28,000,000 $510 $185 151,454 151
Oregon Department of Forestry 07/19/2012 Page 1AGENDA ITEM 2 Attachment 1 Page 41 of 70
ATTACHMENT NO. 8 STATE FORESTS FINANICAL VIABILITY WORKGROUP
Short Term Options and Financial Benefit
Attachment 8 – Short-Term Options and Financial Benefit
Determine potential to add more harvestable volume within existing policies:
1. Potential increases in volume at harvest unit level. Development of State Forest Bulletin/AOP instructions that communicates the following:
Annual Value
Focus: Improve internal communication a. Internally – That the financial situation has not sufficiently improved (same status as last two years) and spending still exceeds
revenue, and revenue projections still continue slowly downward. There is a continued need to be financially prudent.
Unknown
Focus: Timber Sale Planning and Layout b. Address leeway within current policy(s) to function at the higher end of economic range, i.e. “challenge current assumptions”
i. Where feasible, increase more cost effective operations (CC vs. PC) ii. Do not over achieve biological contributions to harvest units – wildlife trees, snags (if green tree retention is met or
exceeded within Appendix J requirements, significant justification is needed to allow additional wildlife trees, i.e. forest health/T&E).
Item i. – Unknown. Item ii. – 2% of
available volume in planned clearcut
timber sales. $306,000
Focus: Timber Sale Administration c. Stress maximizing value on all products related to timber sales, including continued vigilance on utilization issues.
Difficult to calibrate. Staff and field
estimates at 1‐2%. Use 1.5% which
equates to about $230,000.
2. Potential adjustments to existing Implementation Plans Annual Value
A. Astoria and Forest Grove IP revision phase‐in approach – Potential options for phasing more quickly in FY2013 and 2014? Potential for 3MMBF more in AT and 1 MMBF in FG.
AT FY13 ‐ $343,000 AT FY12 (make up
Volume) ‐ $343,000 FG FY13 ‐ $114,000
B. Tillamook District – Five year average of planned/authorized Annual Harvest Objective (AHO) is 15 MMBF short, which translates to a potential of 3 MMBF increase per year. There is potential capacity on district to complete easier units to meet 3 MMBF more per year.
$343,000
3. Implement NC and WO Districts IP revisions. Annual Value
This process continues. The expected increased volume and associated revenue directly related to meeting short term financial goal of increasing FDF by 10%.
NC 35% DFC ‐ $TBD WO 30% DFC ‐ $TBD
AGENDA ITEM 2 Attachment 1 Page 42 of 70
ATTACHMENT NO. 8 STATE FORESTS FINANICAL VIABILITY WORKGROUP
Short Term Options and Financial Benefit
Attachment 8 – Short-Term Options and Financial Benefit
4. Plan to address cost/revenue targets for CSFL. Annual Value
Develop short plan – (2‐3 pages) that connects the dots between DSL’s Asset Management Plan performance targets and ODF’s plans to address meeting the targets, including the bullet points in the FV group’s charter. The plan or perhaps a summary of the plan would go into the Annual CSFL report which will be presented to the SLB in December. Big rocks include: increased harvest levels relative to revised Elliot State Forest FMP, other program efficiencies identified in SFVV effort, and long term efforts to consolidate CSL ownership.
Improved Business Practices/Functions:
5. Address road use fees. Annual Value
There are some questions as to whether all Districts are charging appropriate fees and assessing reciprocal agreements. Potential for reducing road management costs.
Unknown. Currently on‐going
6. Remove deed restrictions on Tillamook District. Annual Value
Currently about 5,000 acres on the Tillamook District have deed restrictions preventing active management. ORS 530.020 allows a remedy, and County Commissioner, Tim Josi has assigned Paul Levesque (county analyst) to look into removing the restrictions.
Unknown.
7. Change the status of distributable revenue for campground fees. Annual Value
Tim Josi and Mark Labhart are supportive of changing to non‐distributable revenue via an IGA similar to the one already in place with the Tillamook Forest Center regarding revenue from the gift shop. This is an agenda item for the next FTLAC meeting in August, 2012.
$80,000
New Marketing Strategies:
8. Evaluate subset of special forest products. Annual Value
Specialty wood products (i.e. burls). Small scale effort to quickly improve KSAs for product identification and customer base development, similar to pole selling effort. Timetable subject to capacity issues in NC. Possible link to Item 6 below.
Unknown. Currently on‐going
9. Develop a special forest products financial package that determines economic viability of having a dedicated special forest products forester.
Annual Value
Use example from private industrial landowner where they have one person who finds, sells and administers removal of non‐timber sale related forest products (cedar salvage, commercial firewood, moss, salal, some pulp, etc.) and has generated significant annual revenue for company.
Results due mid ‐ August
10. Continue Log Sort Sales Pilot Project and report progress. Annual Value
As this process continues, it will help inform future business processes and systems. Unknown.
TOTAL $1,759,000
AGENDA ITEM 2 Attachment 1 Page 43 of 70
ATTACHMENT NO. 9 - State Forest Financial Viability WorkgroupLong Term Options - Priority Survey Results - Stakeholder Committee Review
Priority Recommendation
POLICY - LEGAL OPTIONS
Explore Forest Management Plan Alternatives for Financial Viability
X BOF Performance Measures (potential PM changes in 2012 BOF work plan)
XProvide a sensitivity analysis that estimates the amount of timber harvest volume that would need to be produced with varying stumpage values in order to generate revenues to adequately fund investment levels for Board of Forestry lands. Completed.
XBased on (a) above, analyze and evaluate whether the current NW and SW FMPs are likely to produce timber revenue that will sustain the FDF fund balance and achieve the desired investment levels associate with rebuilding the program.
Explore improvements in Land Exchange and Acquisition Policies (Real Property)
Land Exchange and Acquisition (real property): Consolidation
X Land Exchange and Acquisition (real property): Deed restrictions
Land Exchange and Acquisition (real property): Develop ability to more rapidly capture real property opportunities.
X Sell BOF land - must follow DAS rules, is there a GPV filter?
Assess Other Non-Agency Costs to Division (informational)
XLegislative costs outside of "normal" timber land management.
DOJ costs - public landowner liability, etc.
Law enforcement costs Should this move to recreation options?
BOF SupportGRANT OPTIONS Continue pursuing grant opportunites aligned with mission and objectives
Grants – Are there opportunities available (i.e. Fuels reduction, carbon credits, forest certification, monitoring, etc) Moved from short term.
Attachment 9 - Draft Long-Term Options - Workgroup Prioritization April 29, 2012
LEADERSHIP - ORGANIZATION OPTIONS
Assess Salem staff & district overhead organization. Budget workgroup decisions/discussions. Incorporate into Financial Plan?
Reduce staff or close offices at districts that do not produce net revenue to the FDF. Reopen or temporarily staff these districts during market upturns. Remove?
Assess potential to reduce Acreage with Low Productivity or Low Economic Value
Restructure Districts and, or District boundaries to be more efficient?
X
Consider alternative management models for District’s that currently have, and are expected to continue to have, negative expense vs. revenue ratios.
X
Study the commercial viability of districts with low site forestlands west of the cascades. Explore selling and purchasing or trading for other lands on districts that need to be blocked in or could run more efficiently if they were of a larger size.
Pursue Multi-agency Cost SharingStaff Cost Sharing
Manage and, or assist in Public Land Management (i.e.. Planning, Sale Prep, Marketing, Admin, Log Accountability). ODF is currently providing LAS reports for OPRD. Both BLM and BIA have shown interest in ODF’s accounting capabilities.
Attachment 9 - Draft Long-Term Options - Workgroup Prioritization April 29, 2012 AGENDA ITEM 2 Attachment 1 Page 44 of 70
ATTACHMENT NO. 9 - State Forest Financial Viability WorkgroupLong Term Options - Priority Survey Results - Stakeholder Committee Review
Perform Benchmarking and Comparisons
X Look at other states for possible ideas. See where success is possible versus improbable.
Benchmark against other states for fees they currently charge or incur for timberland management.
Benchmark against other management companies to ensure our management fees for county timberlands are comparable.
Develop State Forests Business Plan
X Develop State Forest Financial Plan – Include goals and objectives.
Create mechanism to address extraordinary economic downturns.
ALTERNATIVE REVENUE OPTIONS
Wind Farms: Receive permission to conduct wind energy feasibility testing on Nicolai Mtn.
Diversification of Revenue Streams - Energy and Telecommunications
Diversification of Revenue Streams - Ecosystem ServicesDiversification of Revenue Streams - Vendors on State Forestland (similar to OPRD, which gets a cut of products sold on their land)
X Legislative change to ORS 758.010 to allow ODF to charge for energy transmission, land out of production, and other types of reimbursement.
PROCESS/EFFICIENCY OPTIONS
Evaluate and streamline business processesSpecial Forest Products: Competitive bids for misc. forest products Referenced in short term options, remove?
Special Forest Products: Re-evaluate fee schedule for special forest product sales. Market and encourage local opportunities. See above.
RECREATION OPTIONS *Link to Alternative Revenue Sources
Reduce or remove sheriff's patrol in districtsIntroduce new recreation fees for developed areas, increase existing fees as appropriate. OAR change.*
Attachment 9 - Draft Long-Term Options - Workgroup Prioritization April 29, 2012
Recreation leases for more developed recreation resources. OAR change.*Partnership with OPRD to help Diversify Recreation Program Funding - long term funding sources, partner with OPRD to identify and secure funds*
Partnership with OPRD to help Diversify Recreation Program Funding - RV registrations*Partnership with OPRD to help Diversify Recreation Program Funding - legislation review *Develop an agreement with OPRD to administer and run operations of targeted recreation facilities*Business Sponsorship Opportunities*User Sponsorship Opportunities*Recreation License Plate*Public Agency and Private Program Grant Funding*Develop Supporting Non-Profit Organizations*Establishment of a Fee Schedule for Event Permits*Raise campground fees*
Attachment 9 - Draft Long-Term Options - Workgroup Prioritization April 29, 2012 AGENDA ITEM 2 Attachment 1 Page 45 of 70
Attachment 10 – State Forests Financial Viability Stakeholder Meeting Minutes – May 1, 2012
ATTACHMENT NO. 10
State Forests Financial Viability Stakeholder Meeting Notes Oregon Department of Forestry
May 1, 2012 Attendees: Susie Jordan, Legislative Fiscal Office; Linda Gilbert, Legislative Fiscal Office; Gil Riddell, Association of Oregon Counties; Mike Cafferata, Oregon Dept. of Forestry; Rex Storm, Mark Rasmussen, Mason, Bruce and Girard; Chris Jarmer, Oregon Forest Industries Council; Lisa Phipps, Tillamook Estuaries Partnership; John Blackwell, Board of Forestry Chair; Ed Deblander, Dept. of Forestry; Jim Paul, Division of State Lands; Ed Kamholz State Forests Advisory Committee Chari; Art Ayre, Budget and Management, DAS; Dan Goody, Dept. of Forestry; Mike Bordelon, Dept. of Forestry; Satish Upadhyay, Dept. of Forestry; Barrett Brown, Motorcycle Riders Assoc.; Mary Schmelz, Dept. of Forestry Background and Context, Mike Bordelon Purpose of Stakeholder input: To review workgroup recommendations and offer additional recommendations regarding short and long term cost reductions and revenue increases that will result in a stabilized Forest Development Fund balance. The stakeholders reviewed the charter section on Workgroup Objectives, short and long term options, and options/recommendations to re‐build the investment to insure adequate, sustainable operations (State Forests Financial Viability Charter, page 5, December 1, 2011 version). Short term recommendations need to be implemented in FY2013 in order to meet charter requirements of increasing FDF account by 10% (aligned with values indicated on Attachment 1 of Charter.) Long term objectives would retain at least 6 months of operating expenses; six months was established by an internal policy that resulted from analyses of previous recessions (the concept of this “safety net” was developed during the recession in the 1980’s). Revenue Projection, Ed Deblander ‐ Revenue Projections are completed twice annually, January and July. They are based upon: 1) Sold sales, which have a timeframe of 1 – 3 years; 2) Planned sales, which are based upon Annual Operations Plans; 3) Future category (projected stumpage x volume harvest target by district). Review of the projections indicates relative improvement to FDF account balance in January 2012 projection as compared to July 2011 projection, although values shown still indicate a flat‐line or slightly negative trend; are still under the 6 month operating reserve; and assume no increase in budgets or investment levels Questions and Answers (paraphrased) Q: Art Ayres: Is the 6 month operating fund supported by the legislature? A: Mike Bordelon: This type of fund is well established, and it’s inherent in this type of work that we have continuity and stability. We have had excellent cooperation and support from Governor’s office, BAM and Legislative fiscal office. A: Susie Jordan: Usually there won’t be a raid on funds, but if there’s an excess of funds, the legislature will look at that; the legislature can change statue to rededicate funds. But the legislature has a good understanding of what these funds are used for, i.e., to fund services. Q: Mark Rasmussen: When the department had $40 million…where did that go?
AGENDA ITEM 2 Attachment 1 Page 46 of 70
Attachment 10 – State Forests Financial Viability Stakeholder Meeting Minutes – May 1, 2012
A: Mike Bordelon: It was reinvested according to our management plans/business strategies at that time. These investments included recreation facility development, forest inventory, LiDAR, monitoring, and higher staff support. Q: Mark Rasmussen: Is there a surge of investments that aren’t being done? A: Mike Bordelon: Yes, for instance the department is not doing as much research and monitoring. Q: Mark Rasmussen: Is the objective to restore those activities that were lost? A: Mike Bordelon: There are legal obligations that must be met, obligations such as the Forest Practices Act, legislative obligations, and the elements in the Greatest Permanent Value Administrative Rule.. In addition there are objectives we would like to meet; like research and monitoring, which has been cut significantly, stand level inventory, recreation, interpretation, education, and young stand management, all of which are currently underfunded. Q: John Blackwell: Did you focus on not properly dealing with Young Stand Management or other deferred investments – specifically, what opportunities are being lost when you are not making these investments? A: Dan Goody: During these reduced fiscal budgets, we received significant ARRA grant funding, which the division used to address many Young Stand Management activities, inventory, and roadside brushing and spraying projects. This funding and 200% accomplishment rate allowed the division to complete needed activities that otherwise would have been deferred. Due to this stopgap investment, the workgroup did not focus on trying to catalog values for lost investments. Q: Jim Paul: Is it fair to say last 3 points on this graph fiscal 2015 ‐ 2017 (in the Revenue Projection handout) is adjustment depending on housing projections, and if that’s so it depends on the economy, which changes, so the projections could change during a six month period. A: Ed Deblander: Yes. It could change during a 6 months period, and the further out we project the less confident the projection is. Sensitivity Analysis, Dan Goody The sensitivity analysis illustrates the relationship between volume and revenue, and estimates. Based on figures from July 2011 revenue projection, approximately $28 million a year is needed to adequately fund the State Forest Division at its current operational level. To meet this annual value and assuming that the only revenue source is timber, the following table indicates the relationship between harvest volume and potential stumpage rates for short term and long term objectives. Short Term (through 2014): Objective is for the division to generate sufficient revenue to meet current and near term expenditure levels.
o At current stumpage price, amount of volume needed to meet projected needs: increase by 20+ MMBF, to 245MMBF
o At current harvest level (221 MMBF/Year), amount stumpage price would need to increase to meet needs: increase to $350/MBF from $315/MBF.
Long Term: Objective is to meet current revenue needs (outlined above in short term) and increase investments in the forest to a sustainable level (i.e. young stand management, remote sensing, inventory, research & monitoring, etc).
At current stumpage price ($315/MBF), amount of volume needed to meet current needs and projected needs for the division to be sustainable is approximately 289 MMBF.
AGENDA ITEM 2 Attachment 1 Page 47 of 70
Attachment 10 – State Forests Financial Viability Stakeholder Meeting Minutes – May 1, 2012
At current harvest level, amount average stumpage price would need to increase to $410/MBF. As shown on the document, this not likely as an average of the three highest years was $360/MBF.
Would add about $5 million in investments that are currently underfunded (monitoring, young stand management, project work, inventory, lidar, staff)
Chris Jarmer noted that harvesting costs should also be considered, noting that logging costs on state timber sales are significantly higher than for private landowners. In this context, stumpage values for ODF timber sales could be increased by some amount if timber harvesting complexity and constraints were addressed (policy change). Mark Rasmussen noted that some private landowners receive the equivalent of $410/MBF stumpage from their lands. Lisa Phipps commented that right now we are looking at only the harvest and economic needs but we aren’t evaluating it against the other uses that the state forest is managed for. I understand that if the department isn’t solvent it can’t manage for any use but I think that when we are talking about increasing harvest for the sole purpose of generating revenue, and not because it is biologically important, etc., that you need to be clear that this is a short term solution (if it is) and second, you will have to figure out a way to balance increasing harvests at the same time the Tillamook action plan is being vetted – does it make it obsolete right out the door? The other GPV’s cannot be overlooked nor should they be and I feel like that was one part of our conversation on Tuesday that was not considered and it is the one part that is going to have the biggest influence on the ultimate decision. Short Term Options, Dan Goody As Dan Goody reviewed the options on the “Short Term Options and Financial Benefit” document, committee members made comments about specific options: Item 2. a Potential adjustments to existing IP’s. During the approval process of the Astoria and Forest Grove revised 2010 Implementation plans, it was determined to phase in volume increases aligned with those plans. In order to meet the mid‐point of the volume target at the end of the 10 year timeframe of the IPs, volume levels could exceed the target in a given year to make up for the phase in period; an opportunity to increase the harvest level in alignment with FMP and implementation policy. Item 2. b: Over the last 5 years, the Tillamook district has harvested an average of 44 MMBF/year, when comparing approved AOPs to sales sold (FY2006 – FY2010). The 2009 IP indicates that the sustainable harvest level is approximately 47 MMBF/year, which creates a 15 MMBF deficit during that time period. This recommendation has similar rationale as 2 a) above. Proposal is to add 3MMBF per year for 5 years to arrive at target annual harvest objective. Tillamook district 15 MMBF increase over 5 years: It seems more prudent to take out 3 MMBF per year than 15 MMBF in one year, including operational capacity issues related to a one time increase. Item 3. NC and WO district IP revisions: Draft Implementation Plans currently out for public review. Inclusion in this list is a placeholder at this point. Ed Kamholz noted that the state of Washington implemented across the board access fees (i.e. parking permit to make forests more self funding) and asked if there’s discussion about looking at fees? Dan Goody responded that item #7, Change the status of campground fees/Tillamook Forest Center would allow those kinds of discussions.
ACTION: Review and assess WDNR public recreation access fee system. Perform this action as part of the benchmarking of other agencies and forest landowners in long term actions.
AGENDA ITEM 2 Attachment 1 Page 48 of 70
Attachment 10 – State Forests Financial Viability Stakeholder Meeting Minutes – May 1, 2012
New Marketing Strategies: John Blackwell noted that the department takes a passive approach to marketing (e.g., not marketing sawlogs during peak markets, other products) and wondered if there was opportunity to approach them market more as a landowner than a custodian. Are there policies or rules that could be changed to allow more flexibility in timing? Dan Goody responded that threatened and endangered species planning requires a two year window, which limits the ability to connect more immediately with the market. In addition, Mike Bordelon noted that the steady and continuous marketing of ODF timber provides a reliable source for purchasers and operators that help maintain timber industry related infrastructure during challenging times. (social value) Item 8. Special wood products: Chris Jarmer suggested that if purchasers are educated about special sale products and they are advertised as part of sales, it could increase bids.
ACTION: Dan Goody: Revisit pulp values to see if the changes implemented over the last year have sufficient additional value to track and include in report. Mark Rasmussen asked whether pulp values had been evaluated, Dan thought they had and it was determined not to be worth pursuing, but said he’d take a second look at them.
Log sort: Some log sort systems have shown increase in revenue, some have not. The department is evaluating, with a pilot project, whether it is a better way to administer sales. Chris Jarmer said it’s important to randomly select sales, not to “cherry pick” them. Ed Deblander said the department will have comparison sale areas or “controls” with similar stands/volume that are contracted differently in order to have a fair comparison. Pilot projects in Astoria and Coos Bay will be conducted as adaptive management trials. Roundtable: Additional Comments /Recommendations Jim Paul: #2, Potential adjustments to existing IP’s, is the best, most viable option. It’s not that the other recommendations won’t generate revenue, but in the immediate (2‐3 years), #2 will add the most revenue. #1 b and c (Sale planning and administration) could also add some revenue. Mark Rasmussen (also Workgroup Member): Good ideas, but it seems like the workgroup focused on operational questions. The big questions are: Does the forest plan represent a sustainable business model? It would be good to clarify how the money gets spent, for instance, how much money does it cost to support the Board of Forestry? Rex Storm: Echoed Mark’s comments about re‐visiting the Forest Management Plan/management strategies. Thought most of the ideas are worthwhile, it will take 24 months to see the revenue increase. This is not a good time to make acquisitions (you are buying a liability), such as the Gilchrest forest, or to invest in those acquisitions. Also, are other forest products such as rock a possibility? Dan Goody responded that rock sales were considered, but since it’s a finite resource, you have to buy it back when you need it again to build roads, which could in the long run cost more depending on market fluctuations. And thought log sort sales are worth investigating, although it will likely be more expensive for the state to do it than the private sector. Gil Riddell: Agreed with Mark Rasmussen’s comments. Barrett Brown: Evaluate this (recommendations from workgroup) the same way the IP’s are evaluated, with regard to impacts. This process is revenue‐ centric at various intersections, but evaluation of other impacts/values should be considered. There may be a negative reaction from some public sectors in
AGENDA ITEM 2 Attachment 1 Page 49 of 70
Attachment 10 – State Forests Financial Viability Stakeholder Meeting Minutes – May 1, 2012
response to access fees, education projects, and campground fees; be sure to weigh whether the cost of the public reaction isn’t greater than the revenue gained. Lisa Phipps: Echoed Barrett’s comments. As a member of the State Forests Advisory Committee, she expressed concern about option 2b (15 mmbf increase over 5 years on Tillamook); would hate to preempt anything that’s going to come out of that process…it loses what the process is intended to do. Think about other outcomes, in terms of the response from the public. With regard to deed restrictions on the Tillamook, the counties will run into challenges removing deeds. Specialty wood products (#8 & #9) are more of a long term options, rather than a short term one. Chris Jarmer: Disagrees that the possible public about increased fees should be a factor; public should be educated that if they expect a product (campground, etc.) to be maintained it has to be funded. Jim Paul: With regard to public fees for services, present a suite of options for comparison. Ed Kamholz: Agreed with Barrett’s comments about public perception. Suggested that the department pursue the options that are measureable (that have a value associated with them).
ACTION: Benchmarking with Washington DNR as a fee model – investigate their process in the challenges they encountered.
Susie Jordan: There are some good ideas, but fees won’t be popular, that is a political reality. Linda: echoed Susie Art Ayre: Good ideas, but focus on the “big rocks”. Long Term Options Dan Goody briefly reviewed the Long Term Options document. Mike Bordelon asked the stakeholders to review the document and provide feedback via e‐mail.
ACTION: Dan Goody: Send out more detailed report developed by Recreation Staff.
ACTION: Mary Schmelz: Prompt members for feedback on long term options by late May, 2012. Other Items: This topic is scheduled for presentation to the Board of Forestry in July, 2012. The agency has developed a Policy Option Package (POP) that includes a request for General Funds for additional acquisition of lands in the Gilchrist State Forest and Education & Interpretation activities (Tillamook Forest Center). This POP is due in bid form to the Budget and Management (BAM) office by August 1, 2012. The Agency Recommended Budget is due by August 31, 2012. Materials presented:
1. DRAFT ‐ Short Term Options and Financial Benefit 2. DRAFT ‐ Long Term Options – Priority Survey Results – Stakeholder Committee Review 3. SF Financial Viability Workgroup DRAFT Sensitivity Analysis of Volume Relationship to Meet
Revenue Needs
AGENDA ITEM 2 Attachment 1 Page 50 of 70
Attachment 10 – State Forests Financial Viability Stakeholder Meeting Minutes – May 1, 2012
4. Comparison of January 2012 State Forests Revenue Projection to July 2011 Revenue Projection, April 2012
5. State Forests Financial Viability Charter, December 1, 2011 version 6. 2013 – 2015 Budget Backgrounder, Developing Budget Additions
AGENDA ITEM 2 Attachment 1 Page 51 of 70
Attachment 11 – State Forests Financial Viability Stakeholder Meeting Minutes – August 14, 2012
ATTACHMENT NO. 11
StateForestsFinancialViabilityStakeholderMeetingNotes
August14,2012OregonDepartmentofForestry
Attendees: Stakeholders: John Blackwell, Board of Forestry Chair; Ed Kamholz, SFAC; Chris Jarmer, OFIC; Mark Rasmussen, Mason, Bruce and Girard (representing the counties) ; Lisa Phipps, Tillamook Estuaries Partnership Department Staff: Mike Bordelon, State Forests Division Chief; Dan Goody, Tillamook District Forester; Ed Deblander, State Forests Asset Manager; Jim Young, Coos District Forester; Tom Savage, Astoria District Forester; Liz Dent, State Forests Deputy Division Chief Review of July BOF Meeting Financial Viability Presentation and results and discussion from BOF Meeting: John Blackwell ‐ To a person, Board members were impressed with the committees’ work and that of all the SF staff. However, he felt (as did some other Board members) that there was an absence of a sense of urgency. Felt like there was a lack of specificity about the next steps in the process. Dan Goody commented that there was more detail available but the presentation was a streamlined product. Dan also commented that it was challenging to present, in a concise manner, all of the processes reviewed and recommendations made by the workgroup (including 17 page report and 10 appendices). One conscious choice was to focus on the longer term issues as they related to policy approval and was subject to BOF authorization, rather than short term actions within agency authorization. A clearer description of some of the short term recommendations and likely action items might have helped inform the BOF about ODF’s urgency in resolving the financial issues. John Blackwell ‐ The Board is curious about how the 6 month operating reserve was determined. Mike Bordelon stated that a workgroup (Jim Young was a member) created after the timber recession in the 1980’s developed a recommendation of reserving funds to a level to 6 to 12 months. That group looked at historic trends in timber prices and the duration of previous timber recessions as the basis for the targeted range of 6 to 13 months. John Blackwell ‐ If the department is confident with a direction (i.e. revising FMP aligned with financial viability), present it to the Board rather than engaging too much in process…again concern with moving too slowly. Liz Dent – Division is very concerned about the time and cost it will take to develop alternate strategies and a potential revision of the FMP. This process needs to include the science work up front. We are working on way to expedite this process, but not at the expense of sound professional work.
AGENDA ITEM 2 Attachment 1 Page 52 of 70
Attachment 11 – State Forests Financial Viability Stakeholder Meeting Minutes – August 14, 2012
John Blackwell ‐ Would there be value in inviting a high level, dispassionate panel (e.g. State Treasurer, State Economist) for feedback? Mike Bordelon thought the idea had merit and would discuss further with John and Doug Decker. Preferably, the timing for this high level panel would be after the final report was drafted and before the January Board of Forestry Meeting. Therefore input and advice from the panel could be incorporated into the final report. Perspectives from other stakeholders: Ed Kamholz asked if the department was missing some bigger opportunities on forestry lands. For instance, in South Dakota, the Black Hills forest is more of a “revenue center” – not solely forestry based but recreation based. Partnering with other interests could elevate revenue, e.g., opportunities such as concessions sales, charging at gates for planned events, revenues from a tourist/excursion railroad all could create revenue the department. Dan Goody responded that this may be part of the solution; but timber will always be a large part of the business model. Mike Bordelon responded that the agency wants to maintain the business model of resources funding the division as derived from the lands managed, as opposed to an appropriations model of the USFS. Liz Dent noted that the department has not been allowed to compete in certain markets, such as ecosystem services and carbon credits, due to public entities not being allowed to financially participate in those markets. It was noted that currently there aren’t many (if any) models that directly monetize options such as ecosystem services. John Blackwell remarked that he would like the department to approach ecosystem services in terms of “addition to”, rather than “instead of”. Lisa Phipps said that a way to generate a sense of urgency would be to connect the services that will be lost due to the lack of revenue such as campground and recreation trail maintenance and other more social needs as well as research and monitoring which are critical to maintaining our understanding of the forest. Mark Rasmussen: ODF has thought of itself as public land agency and not as a business. Balance the focus of management and fiscal value; the department has mostly been focused on management. Chris Jarmer: This would be a cultural shift, incorporation of daily fiscal considerations into your business model when department has primarily been focused on management. Ed Kamholz: Is there a possibility to bring in expertise from private sector to comment? This may help with the cultural shift – input from entities/individuals with strong business perspective could help Mark Rasmussen: Invite panel from a various companies to help the board with this decision. DG: this is such a unique business perspective; you are part of state government and hence subject to unique regulations, social promises that are the price of government as well. Ed Kamholz: There are underperforming assets that could be addressed and would result in better long term fiscal health.
AGENDA ITEM 2 Attachment 1 Page 53 of 70
Attachment 11 – State Forests Financial Viability Stakeholder Meeting Minutes – August 14, 2012
Mike Bordelon: We have taken measures to improve: one of the new BOF Performance Measure for the State Forests program is to be financial sustainable. The application of this performance measure will help inform choices relative to many of those items. Perspectives on the Long Term Options and Recommendations: Dan Goody reviewed the long term issues for consideration in the State Forests Financial Viability Charter – Final Interim Report, Page 14 – Some items that were further discussed: Evaluate potential financial improvement through modification of BOF PM’s, with focus on PM’s #3 and #6…” Discussion/potential action: The goal is to create structure in the short term; targets could be adjusted in the performance measure. The PM that requires 17%‐20% complex stands in 20 years was a previous Board’s interpretation of GPV that has a significant effect on economic outputs from the Tillamook district. Improvements in Land Exchange and Acquisition policies: The current land exchange and acquisition statutes and policies do not allow for capturing real property opportunities and/or divesting in underproductive lands. The lengthiness and cumbersome nature of the process eliminates or greatly reduces participation in capturing “hot markets” or local opportunities. The creation of a dedicated land acquisition fund, would allow revenue generated from sold parcels to be reinvested into other forestlands more aligned with divisional objectives. Improvements to rules and policies would also allow for consolidation of BOF and CSL (Common School Land) land, which would reduce operational costs. However, this is an arduous process and the department doesn’t have the staff currently to proceed. A lengthy discussion ensued about the interaction of cross county land exchanges and selling/buying lands. A way to begin would be a legislative concept created with the counties. Development of a State Forest Business Plan: Currently, the Division has a business model that generates revenue from the lands that it manages and those revenues pay for management activities. This type of business model is different than an appropriations model, like the USFS. The workgroup recommended that a Business Plan be developed to identify divisional financial objectives and goals. Currently, there are only two elements of a business plan established: the ODF/Counties revenue split and retaining six months of operating reserve in the FDF. The development of the Financial Viability charter established another working element making a goal to generate $5 million to reinvest back into the forest. Prior to the adoption of the NWFMP, financial metrics played a stronger role in decision making, such as requiring minimum internal rates of return on young stand management and determining harvest rotations based on culmination of MAI and PAI (Mean Annual Increment and Periodic Annual Increment). It became difficult to monetarily quantify investment into development of habitat and stand structure. John Blackwell: The department would benefit from feedback from an outside party with a business perspective.
AGENDA ITEM 2 Attachment 1 Page 54 of 70
Attachment 11 – State Forests Financial Viability Stakeholder Meeting Minutes – August 14, 2012
Mark Rasmussen: Create a 5 year business plan, revisit every 5 years to see if the plan still makes sense. Mike Bordelon: Another objective that could be in a business plan is diversifying revenue streams, i.e. target is to get 25% revenue from non‐timber products. Currently we estimate 98% depends upon stumpage value, which fluctuates. Chris Jarmer: Diversification can be a distraction – a lot of energy spent exploring something that may not offer much return. Ed Kamholz: Department could start measuring the costs of what you are providing for the state, e.g., with the new conservation areas build in performance measure the costs. Chris Jarmer: No matter how detailed you become with cost side, it’s always debatable and a matter of interpretation what the benefit is. Alternative Strategy Development: The workgroup recommended development with alternative management strategies aligned with financial viability (now reflected in a new BOF Performance Measure). Liz Dent: It is important to be clear about when you are making a value decision as opposed to a scientific decision about how benefits could be built in. John Blackwell: The board has confidence in staff; seems that staff has pieces in place and could make recommendations to the board; which “wouldn’t be cautious” in those recommendations. Liz Dent: We want to front load alternative strategies with the science in order not to have what happened with the INR report happen again. A conundrum is that we don’t have the money to do this. Mike Bordelon: If we are going to fast track the process we need to outline to the board how this would be done. Materials Reviewed: State Forests Financial Viability Work Group Long Term Options ‐ Draft – Stakeholder Committee Review, April 29, 2012 Short Term Options: There is value gain to look at opportunities to meet standards but not overachieve (e.g., green tree retention). Need to communicate this appropriately. Already foresters are having conversations and weighing these considerations more so than they previously. Agency Policy Option Packages (requests to Governor’s office/legislature for funding)
General Fund ($3 million) to help with recreation, interpretation and education (Comment: CJ: Be aware of agendas that want to disconnect anything that’s funded by timber harvest – e.g., education, recreation.)
Funding for the TRASK research project
Common school funding for monitoring on the Elliott State Forests ($5000)
Lottery funds for the purchase of additional Gilchrist acres ($7 million)
AGENDA ITEM 2 Attachment 1 Page 55 of 70
Attachment 11 – State Forests Financial Viability Stakeholder Meeting Minutes – August 14, 2012
Lisa Phipps ‐ How will the department communicate short term solutions to the public? How will the department communicate that they are indeed short term & sunset those changes? Mike Bordelon: Some of the short term changes will be integrated into the annual operation plans, primarily related to Implementation Plan harvest opportunities. Feedback on perspectives about SF Financial Viability workgroup process: Jim Young (co‐vice chair): Positive feedback on having stakeholders involved as a sounding board Ed DeBlander (co‐vice chair): Mark Rasmussen and others were good “reality check” offering helpful external feedback. Next Steps Shorter term opportunities: What have we learned from this process, where are we going? Look at harvest opportunities within current policies in the Astoria, Forest Grove, North Cascade and West Oregon, and Tillamook districts. Astoria offered the most opportunity, due to deferred harvest related to IP harvest level phase‐in approach, i.e., this district harvested at the lower range of the plan parameters in the past and could recover this amount in 2014 by harvesting up (and actually over the amount) to make up the difference. Currently, we are evaluating process and timeline on how to capture deferred volume. In Forest Grove may be opportunity for slight increase. We will not move ahead with Tillamook district opportunities until initial harvest model comparisons are made using Available Acres information. Due to the timber recession, approximately 15 MMBF of timber sales were planned/prepared, but not auctioned. This analysis is currently underway and should be completed sometime in September. NOTE: There may not be a clear understanding of what the “phase in” and “deferred” process entails (see May 15, 2012 North Coast Coalition letter); better communication on this is essential. ACTION: Work Group complete draft final report in October and provide to stakeholder
committee.
ACTION: Schedule meeting with higher level panel in October (Mike Bordelon & John Blackwell will discuss).
ACTION: Stakeholder group review final draft and if another meeting is needed, it will be scheduled.
NOTE: Control expectations and focus on efforts that are most likely to generate significant revenue.
AGENDA ITEM 2 Attachment 1 Page 56 of 70
Attachment 11 – State Forests Financial Viability Stakeholder Meeting Minutes – August 14, 2012
Feedback about Improving the Final Report:
Last paragraph on page 9 of SFFVC‐ Interim report: Consider removing this paragraph before this document is broadly distributed.
Re‐word report to take credit for areas where department has taken action, such as “leave trees”; elevate the positive actions, present in such a way to illuminate the positive change. Currently the report is written in such a way that may make audience ask “why weren’t you doing this if you could have, i.e., not harvesting allowable amount of leave trees?
Write a one or two page executive summary would be helpful.
Remove references to “what we didn’t do” in document.
Consider asking an external party to review the document for additional feedback. Perspectives on previous cost reductions:
One paragraph of those 2009 cost reductions would be valuable.
Really make it clear that some investments aren’t occurring (research and monitoring) due to these earlier cost reductions.
AGENDA ITEM 2 Attachment 1 Page 57 of 70
North Coast State Forest Coalition c/o Northwest Steelheaders
6641 SE Lake Rd. • Milwaukie OR 97222 503-653-4176 • [email protected]
A coalition of conservation and fishing groups working together for a balanced plan to protect the Tillamook and Clatsop State Forests’ natural legacy.
To: State Forest Financial Viability Work Group From: North Coast State Forest Coalition Date: May 15, 2012 Re: Viability materials Thank you for the opportunity to share our thoughts on the ongoing work the department has undertaken on the financial viability of the state forest program. We recognize the need for creative solutions to ensure financial viability. We know this is difficult work, but it is also essential to effectively attain the GPV legal mandate. The information provided on long-term options provides evidence of creative thinking to consider novel and unorthodox methods of funding the state forest program. We look forward to helping the agency consider these options in greater detail over time. Regarding the short-term options, we identified several areas of concern. As you know, the Greatest Permanent Value rule carries a mandate to maintain and enhance habitat and use the best available science. As the recent INR report noted, there is reason to be concerned about the degree to which current plans are either grounded in the best science and whether the plans will protect, maintain, and enhance native wildlife habitat while restoring properly functioning aquatic habitat. Given this uncertainty, we think it is unwise to further erode environmental protections as suggested in Option 1B, which suggests operating so as to increase clear cutting and aim low on retention of biological legacies. Option 2A is to phase in the Astoria and Forest Grove IP's more rapidly than planned. We ask that you not pursue 2A. The phased-in approach was put forward by ODF to allow for integration with the "conservation area" discussion currently on the Board of Forestry work plan, as well as to let concerns by the INR be addressed. Option 2B relates to opportunities for focusing on “easier units” on the Tillamook District and refers to materials from Ms. Kate Skinner. We do not have these materials, but given the enormous uncertainty regarding inventory, available acres, and transportation planning that the Tillamook District is trying to address, we are concerned about potential solutions that focus on increasing harvest or getting the easily accessible timber first. Option 5 regarding roads seems worth pursuing, though again we lack detailed information on this topic. Option 6 regarding deed restrictions is a concern. Our understanding is that some of these parcels were transferred to the state for environmental, recreational, or scientific reasons. Any increased harvest of timber in those areas should be undertaken only after a thorough analysis of impacts and to ensure consistency with the deeds themselves. Options 7-10 all look to hold some promise to us, and we look forward to learning more about them as the group continues its work. Thank you again for the chance to comment on these materials.
AGENDA ITEM 2 Attachment 1 Page 58 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
ATTACHMENT NO. 13
MB&G: Feasibility Analysis for O&C Counties - Appendix E
Management Cost Analysis
The purpose of this analysis is to review historic management costs for the BLM western Oregon lands and compare them with costs for other agencies and the private sector. This analysis will provide a basis for management cost assumptions for the proposed public trust organization.
Western Oregon BLM
The BLM in western Oregon is organized into six districts in Salem, Eugene, Roseburg, Medford, Coos Bay, and Klamath Falls.1 The state headquarters is in Portland.
According to data from the BLM’s Western Oregon Plan Revision, the western Oregon BLM budget averaged about $141 million annually from 2002 through 2006 and then ramped up to almost $173 million in 2008.2
The largest expenditure of funds, representing 64% of the current budget, is for the O&C land grants and management of lands and resources programs. These programs provide for forest management, reforestation and forest development, rangeland, recreation, soil, water and air, and wildlife and fish habitat on the O&C grant lands and public domain lands in western Oregon. Annual budget by District is shown below.
Western Oregon BLM budget by District ($000); Source: Western Oregon Plan Revision.
Office 2002 2003 2004 2005 2006 2007 2008
Coos Bay 12,595 13,036 12,036 11,361 12,825 16,031 14,555
Eugene 14,490 13,957 13,863 11,321 11,882 18,449 17,207
Medford 33,870 41,429 40,333 37,622 33,890 37,240 36,662
Roseburg 14,958 14,528 15,174 13,156 14,715 13,156 17,848
Salem 19,874 17,623 16,008 16,912 16,070 19,256 19,363
State Office 46,430 41,545 40,445 49,922 51,289 65,057 66,944
Total 142,217 142,118 137,859 140,294 140,671 169,189 172,579
The average budget over this time period amounts to $58 per acre of land administered by the BLM within the WOPR Planning Area.3
The total BLM budget per unit of harvest in 2006, when 196.1 MMbf was harvested, was $717/Mbf. However, this total budget is for all programs, not just timber management. The Timber Program portion of the BLM budget in 2006 was $31.2 million, or $159/Mbf harvested.
1 The Klamath Falls office is part of the Lakeview District. 2 This excludes the budget for the Klamath Falls field office of the Lakeview District. Although the K Falls office has some responsibilities within the western Oregon lands, most of the Lakeview District budget goes to work in eastern Oregon. 3 2,557,800 acres including O&C Lands, Coos Bay Wagon Road Lands, Public Domain Lands, and Other Public Lands.
AGENDA ITEM 2 Attachment 1 Page 59 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
The intensity of timber harvest can be measured by dividing total harvest per gross acres managed. In 2006, the BLM harvested an average of 77 board feet per acre under management.
The BLM employed 1,231 staff on western Oregon lands in 2007. This includes 958 District Staff and 273 state office staff. 4 This equates to one employee per 2,077 acres managed.
Oregon Dept. of Forestry
The Oregon Dept. of Forestry (ODF) serves as a reasonable basis for estimating overall management costs under the proposed trust organization because it also manages trust lands. Many of these lands (e.g. the Elliott State Forest) are in close proximity to western Oregon BLM lands and would probably share similar land management cost drivers.
The ODF manages 121,000 acres of Common School Fund Lands (CSFL) under contract with the Oregon Dept. of State Lands, and 698,000 acres of Board of Forestry (BOF) Lands. Both types of lands are managed as trust assets. The beneficiary of the CSFL’s are the Common School Fund (CSF) while the beneficiaries of the BOF land are the counties in which the lands reside, referred to as the Trust Land Counties.
The ODF is reimbursed for the cost of management of CSF lands under the contract with the ODSL. The ODF retains 36.25% of timber sale revenues for management of the state-owned county trust lands.
Revenues and costs are tracked separately for each trust. The ODF annually prepares a report for the CSF and Council of Trust Land Counties which provides detailed data on revenues and management expenditures. We compiled this data for the previous 10 years, which is summarized in tables in the Appendix.
The following table summarizes management cost information per Mbf of harvest, per acre managed and shows the range of expenditures as a percent of total revenues, all for the 10 year period ending with FY2010. The data is for the combined expenditures on CSF and BOF lands.
Total Expenditures Per MBF of Harvest
Total Expenditures Per Gross
Acre Managed
Total Expenditures as a Percent of Total Revenues
Minimum $71.14 $29.70 28%
Average $93.85 $40.32 36%
Median $86.12 $36.51 35%
Maximum $122.56 $63.95 52%
Expenditures include all direct costs of management (personal services, services and supplies, capital outlays, other expenditures) as well as pro-rated administrative costs. As far as we can ascertain, these are comparable to the BLM expenditures discussed earlier.
4 Total state office staff of 414 was pro-rated at 66% based on the share of all District staff that is located in western Oregon districts.
AGENDA ITEM 2 Attachment 1 Page 60 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
Overall, management costs averaged about $40 per gross acre under management. Personal services represented 48% of total costs, while services and supplies represented 33% of costs. Administrative overhead (including a pro-rated share of the departmental overhead, capital improvements, seed orchard expenses, etc.) represented 18% of total costs. On CSF lands, the per-acre management cost averaged $38 while on BOF lands the cost averaged $41. For the CSF lands, however, expenditures do not include a fire patrol assessment that is billed to the DSL. In 2010, this amounted to $295,280, or $2.44 per acre managed, bring the total to $40/acre.
Management costs (including overhead) represented 36% of revenues during the period, varying between 28% and 52%. Revenues include the stumpage value of timber sold plus other miscellaneous revenues.
Another way to express management costs is per volume of timber harvest basis. Over the 10-year period, management costs averaged about $94 per Mbf of timber harvest. For the CSF lands only, costs averaged $144/Mbf and ranged from $93 to $240 depending on the year. For BOF lands, costs averaged $89/Mbf and ranged from $65 to $117.
The intensity of timber harvest can be measured by dividing total harvest per gross acres managed. Between 2001 and 2010, the ODF harvested an average of 352 board feet per acre under management.
Another data set available from the CSF annual reports is timber sale project costs. These appear to be the costs that are directly related to timber sale preparation and administration and ought to be comparable to the BLM Timber Program costs. For 12 sales in FY2010 and 18 sales in FY2011 (budgeted values) the volume-weighted average project cost per Mbf harvested was $20.70/Mbf. Costs for individual projects ranged from $6.17 to $59.87/Mbf.
Project Cost Per Mbf
Project Cost Per Acre
Min $6.17 $65.46
Average $23.61 $951.97
Median $19.23 $676.10
Max $59.87 $3,713.52
Costs varied more widely when expressed on a per-harvested-acre basis, suggesting that this would not be a good metric for predicting management costs.
The following table shows the trust counties’ share of revenue for the last three fiscal years. The volume-weighted average county revenue was $192/Mbf during this period of time, when log prices were depressed by the economic conditions. On a per acre basis, trust county revenue averaged $69 per gross acre under management during the three years.
Fiscal Yr Gross Acres Managed
Total Timber Harvest (Mbf)
Harvest Per Acre
Managed (BdFt)
County Share of Revenue
County Revenue Per
Mbf
County Revenue Per
Acre Managed
2008 697,883 236,578 339.0 $51,183,661 $216.35 $73.34
2009 657,710 236,912 360.2 $42,472,866 $179.28 $64.58
2010 657,710 236,142 359.0 $42,572,163 $180.28 $64.73
Average 671,101 236,544 352.5 45,409,563 $191.97 $69.05
AGENDA ITEM 2 Attachment 1 Page 61 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
The ODF 2011-13 budget presentation to the legislative Ways and Means Committee provides information on program staffing. As the following table summarizes, total staffing allocated to management of the CSF and BOF lands totals 235 FTEs, or 1 FTE per approximately 3,500 acres.
Program Manage‐ment FTEs
Non‐MgtFTEs Total FTEs
Gross Acres Managed
Acres PerFTE
Mgt. of Common School Lands 8.84 23.70 32.54 120,924 3,716
Mgt. of Board of Forestry Lands 41.52 160.83 202.35 697,883 3,449
Total 50.36 184.53 234.89 818,807 3,486
An analysis of management costs on the Elliott State Forest, conducted by MB&G in 2003, found that CSFL management costs were in line with those experienced by other owners of similar forestlands. The analysis included comparisons with overall ODF costs, Washington DNR land management costs, and an average of 4 industrial timberland owners in Oregon and Washington who were interviewed in 1997. Although the report is dated, it provides us with some basis to think that the ODF’s cost structure is probably pretty reasonable as a model for the proposed O&C Trust.
Washington DNR
The Washington DNR is another public agency that manages trust lands that may serve as a useful basis for analyzing management costs. The DNR manages 2.9 million acres of publicly owned trust lands, including timberlands, agricultural lands, submerged waters, and commercial properties. The agency closely tracks costs and revenues for each of the trusts they manage.
The DNR’s Annual Report for 2010 indicates the following about revenue sharing and management costs:
By law, 70% of the revenue earned from its Upland State Grant Lands is distributed to beneficiaries, and the remaining 30% goes into the Resource Management Cost Account (RMCA) to fund DNR’s management of the lands.
The management expenses are accounted for as follows:
% of Gross Revenue
% of Costs
Cost Classification
7.8% 26% Product sales & leasing
7.4% 25% Capital investments
5.8% 19% Land Management
2.5% 8% Interagency payments
2.0% 7% Agency support
1.3% 4% Engineering services
1.3% 4% Agricultural resources
0.7% 2% Asset Mgt & protection
0.6% 2% Administration
0.3% 1% Law enforcement
0.2% 1% Special employment (correction camps program)
30.00% 100% Total Expenses
AGENDA ITEM 2 Attachment 1 Page 62 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
By law, revenue earned from State Forest Lands (formerly known as Forest Board Lands) goes to the county in which the land is located, the State General Fund for support of Common Schools, and to the Forest Development Account (FDA) to fund DNR’s management of the lands.
50% of the revenue from Purchase Lands and 25% of the revenue from Transfer Lands goes to the FDA fund. Overall in 2010, 26.3% of revenues went to the FDA Fund to pay for land management expenses on these lands.
The management expenses are accounted for as follows:
% of Gross Revenue
% of Costs
Cost Classification
10.4% 39% Product sales & leasing
6.6% 25% Land Management
2.8% 11% Interagency payments
2.6% 10% Agency support
1.8% 7% Engineering services
0.7% 3% Administration
0.6% 2% Asset Mgt & protection
0.4% 2% Law enforcement
0.3% 1% Special employment (correction camps program)
0.2% 1% Capital investments
26.40% 100% Total Expenses
Expenditure measures for the last five years for the forested trust lands are summarized in the following table. This includes both the RCMA Upland Account (State Grant Lands) and FDA Account (State Forest Lands). Expenditures include operating expenses only. Capital expenses are excluded.
Fiscal Year Expenditures per Acre
Expenditures Per Mbf Sold
2010 $29.57 $82.36
2009 $27.52 $101.35
2008 $31.21 $94.95
2007 $19.54 $78.66
2006 $27.85 $104.92
Average $27.14 $92.45
Expenditures for the management of the trust lands averaged $27 per acre, or $92 per Mbf harvested. It should be noted that agency budgets in 2009 and 2010 were very constrained as a result of declining timber harvest revenues, and steps had been taken to control costs.
We don’t have direct data on timber management program costs for the DNR, but from the cost structure tables above, we see that Product Sales & Leasing represent 26% of expenses for RMCA and 39% for FDA trusts. The average of this is about 33%. If we assume that 33% of the $92.45/Mbf average expenditure is the cost of the timber sale program, the average would be $30/Mbf.
AGENDA ITEM 2 Attachment 1 Page 63 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
The intensity of timber harvest can be measured by dividing total harvest per gross acres managed. Between 2006 and 2010, the DNR harvested an average of 295 board feet per acre under management.
No information on staffing was presented in DNR annual reports. Additional detail on the DNR financials is presented in appendix tables.
Private Sector TIMOs and REITs
Private sector Timberland Investment Management Organizations (TIMOs) and Real Estate Investment Trusts (REITs) manage timberlands for investors such as pension funds, university endowments, and high net worth individuals. They have a fiduciary responsibility to maximize financial returns and typically manage intensively for timber revenue.
The table below provides some financial metrics for westside properties. One is based on actual financial results for the last 5 years. The others are projected averages for the first 10 years of the discounted cash flow analyses developed by MB&G for appraisal purposes. We believe these are realistic financial results although they are based on projected log prices and costs.
Property Gross Revenue Per Acre/Yr
Operating Expense Per Acre/Yr
Operating Expense Per
Mbf Harvested
Net Income Per Acre/Yr
Operating Expense as % of
Gross Rev.
A $275 $51 $101 $124 30%
B $361 $53 $85 $307 22%
C $391 $56 $82 $213 21%
D $291 $48 $79 $152 32%
Average $329 $52 $87 $199 26%
Ratios tend to be more favorable for properties with proportionally more mature timber, obviously, because current income is higher.
Staffing in the private sector tends to be leaner than for public agencies, in part because the scope of responsibilities and accountabilities is narrower. Also, private land managers tend to rely to a larger extent on contract labor for on-the-ground management rather than internal employees. The number of employees per acre managed varies by organization. We could find current employee counts for two TIMOs. Another with management responsibility for 175,000 acres has 42 employees, including all FTEs in land management and ½ of general admin FTEs, or one employee per 4,200 acres.
Company A manages 3.0 million acres in the PNW and US South has 300 employees, or one per 10,000 acres under management.
Company B manages 175,000 acres in the westside PNW and has 42 employees (including all FTEs in land management and 50% of general and admin staff), or one per 4,200 acres.
Company C manages 135,000 acres in the westside PNW and has 35 employees, or one per 3,700 acres.
AGENDA ITEM 2 Attachment 1 Page 64 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
An MB&G cost survey completed in 1995 included 11 western land management organizations in Oregon, Washington, and northern California. All of the companies managed more than 100,000 acres. The acreage managed per employee ranged from 6,100 to 15,700 and averaged 9,800. The harvest volume per employee averaged 4.1 MMbf with a range of 1.6 to 6.8 MMbf. These data include field personnel as well as support and administrative staff, and may include acquisition/divestiture staff.
A more recent cost survey (2008) of nine companies in western Oregon indicated that staffing levels may have decreased in recent year. Staffing in this survey averaged 1 employee per 11,300 acres. The range was 1 per 5,700 to 21,250 acres. For our purposes, we think 1 FTE per 10,000 acres is a reasonable average.
There ought to be an economy of scale consideration. A larger land base does not require proportionally more people to manage it because of size efficiencies.
Analysis
The table below summarizes the cost structure we’ve identified for each agency and a typical organization in the private sector.
Organization
Op. Expense Per Acre Under
Management
Op. Expense Per Mbf
Harvested or Sold
Timber Program Cost
Per Mbf Harvested or
Sold
Acres Managed Per
FTE
Bd.Ft. Harvested or Sold Per Acre Managed
BLM, Western Oregon $58 $717 $159 2,077 77
Oregon Dept. of Forestry $40 $94 $21 3,500 352
Washington DNR $27 $92 $30 n/a 295
Private Sector $52 $90 $15 10,000 625
Western Oregon BLM costs are very high when measured on a per-Mbf basis because of high expenses (NEPA, etc) and very low harvest intensity, measured in terms of board feet harvested per gross acre managed. Surprisingly, expenditures on a per acre basis are not much higher than in the private sector, although the types of costs would presumably be dramatically different. Private sector costs are oriented to a large extent around timber production (getting sales ready for harvest and administering the harvest as well as maintaining and constructing roads) and silviculture (financially-optimal investments in productivity).
Expenditures on a per acre basis for the ODF and DNR are lower than both the BLM and private sector. This reflects a lower intensity of management compared to the private sector (timber harvest per acre of about half the private sector) and at the same time, much higher management efficiencies than the BLM.
For the purposes of this feasibility analysis, the best cost parameter would be the operating expense per acre under management. We would expect the overall costs for the “short rotation even-aged” management approach would be close to the private sector’s cost of $52/acre; we’ll use $54.
Our perception, justified by the harvest per acre figures, is that the ODF manages more lands more intensively than the DNR, which historically has been subject to more environmentally-based political pressures. The ODF manages based on a combination of relatively short rotation even-aged management
AGENDA ITEM 2 Attachment 1 Page 65 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
and longer-rotation, structure-based management. Its average cost of $42 per acre would be a suitable proxy for long-rotation even-aged management.
The Biodiversity management approach is assumed to involve less management intensity overall than the even-aged approaches. We assume less timber volume would be harvested and there would be less activity on the ground. We’ll assume a cost structure that would average $27/acre on this portion of the land base.
Finally, the Reserve management approach would have the least intensity of management and should therefore be the lowest-cost approach. We don’t have a good proxy for this management. The BLM’s cost structure is certainly too high to represent the reserve approach. As a proxy for this cost, we’ll assume 1/3 the cost of short rotation management, or $18.00 per acre.
These costs recognize added costs of forest fire protection on the Trust lands, assuming that the current contract between the BLM and Oregon Dept. of Forestry, currently about $7 million annually, is continued on the proposed trust lands. Two dollars per acre under each of the management approach represents this additional cost, compared to the Oregon Fire Patrol Assessment charged to private landowners.
Summary
Management Approach Management
Expenditure/Acre/Yr
Short rotation even‐aged $54.00
Long rotation even‐aged $42.00
Biodiversity $27.00
Reserve $18.50
AGENDA ITEM 2 Attachment 1 Page 66 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
APPENDIX
Oregon Department of Forestry Data Tables
1) Common School Fund
OREGON DEPT OF FORESTRY ‐ COMMON SCHOOL FUND LAND MANAGEMENT HISTORY
Transfers Out Total Costs
Fiscal Year
Timber Sales
and Forest
Product Sales
Revenue
Personal
Services
Services &
SuppliesCapital Outlay
Special
Payments &
Other
Expenditures
Total
Expenditures
Admin Prorate,
Capital
Improvements,
COPS, Seed
Orchard, etc.
Fund 52
Expenditures
and Revenue
Transfers
Timber Sales
Revenue of
Volume
Removed
Timber Harvest
Volume
Removed
(Mbf)
Total
Expeditures
Per MBF of
Harvest
Gross Acres
Managed
Total
Expenditures
Per Gross Acre
Managed
Total
Expenditures
as a Percent of
Total Revenues
2010 9,646,062$ 2,207,713$ 1,276,146$ 4,407$ ‐$ 3,488,266$ 386,303$ 3,874,569$ 8,221,998$ 24,812 140.59$ 120,924 32.04$ 40.2%
2009 13,569,087$ 2,422,160$ 1,674,099$ 19,081$ ‐$ 4,115,340$ 776,531$ 4,891,871$ 12,419,783$ 29,287 140.52$ 123,225 39.70$ 36.1%
2008 9,841,438$ 2,335,231$ 1,692,094$ 14,327$ ‐$ 4,041,652$ 804,938$ 4,846,590$ 11,988,895$ 22,974 175.92$ 123,225 39.33$ 49.2%
2007 12,590,076$ 2,473,445$ 2,007,265$ (1,280)$ (54)$ 4,479,376$ 947,815$ 5,427,191$ 12,760,992$ 27,084 165.39$ 123,879 43.81$ 43.1%
2006 9,656,593$ 2,414,501$ 1,861,269$ 13,433$ ‐$ 4,289,203$ 936,936$ 5,226,139$ 7,609,658$ 17,833 240.52$ 123,879 42.19$ 54.1%
2005 19,092,180$ 2,344,566$ 1,687,799$ 16,833$ 34,193$ 4,083,391$ 1,037,909$ 5,121,300$ 20,080,172$ 42,106 96.98$ 123,879 41.34$ 26.8%
2004 15,360,073$ 2,143,416$ 1,506,424$ 138,230$ 30,802$ 3,818,872$ 881,152$ 4,700,024$ 14,260,450$ 32,520 117.43$ 123,879 37.94$ 30.6%
2003 8,550,000$ 2,142,745$ 1,567,088$ 2,471$ 50,167$ 3,762,471$ 660,865$ 4,423,336$ 10,992,972$ 24,310 154.77$ 123,879 35.71$ 51.7%
2002 13,671,493$ 1,977,222$ 1,386,074$ 23,642$ 68,574$ 3,455,512$ 806,418$ 4,261,930$ 14,043,117$ 29,557 116.91$ 123,879 34.40$ 31.2%
2001 16,787,101$ 1,986,033$ 1,243,061$ 12,629$ 171,314$ 3,413,037$ 740,159$ 4,153,196$ 19,231,816$ 36,621 93.20$ 123,879 33.53$ 24.7%
Average 12,876,410$ 2,244,703$ 1,590,132$ 24,377$ 35,500$ 3,894,712$ 797,903$ 4,692,615$ 13,160,985$ 28,710 144.22$ 123,734 37.93$ 36.4%
Source: Common School Forest Lands Annual Report, 2010. Tables 1 and 3. Avg BdFt/Ac 232
Revenue includes timber sales, negotiated sales, rights‐of‐way, permits, etc.
Expenditures do not include $295,280 (2010) billed to DSL for fire patrol assessment.
OREGON DEPT OF FORESTRY ‐ COMMON SCHOOL FUND LANDS TIMBER SALES SOLD IN FY2010 AND PLANNED 2011
Sale DistrictTimber Sale
Volume MBF
Acres Partial
CutAcres Clearcut
Volume
Removed Per
Acre
Total Project
Costs
Project Cost
Per Mbf
Project Cost
Per Acre
2010‐1 Coos 5,189 ‐ 94 55.2 77,789$ 14.99$ 827.54$
2010‐2 Coos 5,817 ‐ 89 65.4 142,098$ 24.43$ 1,596.61$
2010‐3 Coos 4,032 ‐ 65 62.0 241,379$ 59.87$ 3,713.52$
2010‐4 Coos 5,405 ‐ 101 53.5 106,533$ 19.71$ 1,054.78$
2010‐5 Coos 2,363 ‐ 72 32.8 65,685$ 27.80$ 912.29$
2010‐6 Coos 3,254 ‐ 55 59.2 90,239$ 27.73$ 1,640.71$
2010‐7 Coos 6,827 ‐ 114 59.9 57,910$ 8.48$ 507.98$
2010‐8 Coos 7,571 ‐ 133 56.9 91,175$ 12.04$ 685.53$
2010‐9 Coos 1,951 ‐ 42 46.5 80,610$ 41.32$ 1,919.29$
2010‐10 W Oregon 1,355 30 49 17.2 76,926$ 56.77$ 973.75$
2010‐11 W Oregon 511 ‐ 24 21.3 4,184$ 8.19$ 174.33$
2010‐12 Til lamook 1,683 54 2 30.1 35,260$ 20.95$ 629.64$
2011‐1 Coos 4,700 ‐ 81 58.0 46,600$ 9.91$ 575.31$
2011‐2 Coos 2,100 ‐ 38 55.3 94,625$ 45.06$ 2,490.13$
2011‐3 Coos 3,800 ‐ 72 52.8 52,500$ 13.82$ 729.17$
2011‐4 Coos 1,600 ‐ 33 48.5 22,000$ 13.75$ 666.67$
2011‐6 Coos 3,300 ‐ 68 48.5 54,500$ 16.52$ 801.47$
2011‐7 Coos 2,900 ‐ 51 56.9 113,000$ 38.97$ 2,215.69$
2011‐8 Coos 8,100 548 ‐ 14.8 50,000$ 6.17$ 91.24$
2011‐9 Coos 2,800 256 ‐ 10.9 50,000$ 17.86$ 195.31$
2011‐10 Coos 1,600 ‐ 28 57.1 39,000$ 24.38$ 1,392.86$
2011‐11 Coos 1,190 ‐ 37 32.2 21,420$ 18.00$ 578.92$
2011‐12 Klamath Lake 1,848 462 ‐ 4.0 30,242$ 16.36$ 65.46$
2011‐15 W Oregon 800 ‐ 42 19.0 15,000$ 18.75$ 357.14$
2011‐16 W Oregon 748 ‐ 17 44.0 10,382$ 13.88$ 610.71$
2011‐17 W Oregon 1,026 47 14 16.8 22,420$ 21.85$ 367.54$
2011‐18 SW Oregon 700 110 ‐ 6.4 30,000$ 42.86$ 272.73$
TOTALS 83,170 1,507 1,321 29.4 1,721,477$ 20.70$ 608.73$
Source: Common School Forest Lands Annual Report, 2010. Table 5.
Project Cost
Per Mbf
Project Cost
Per Acre
2011 sale include CSFL volume and costs only Min 6.17$ 65.46$
2011 excluded 3 very small sales Average 23.61$ 951.97$
Median 19.23$ 676.10$
Max 59.87$ 3,713.52$
Fund 52 Expenditures
Transfers Out include: prorated portio of overall agency admin, capital improvement projects, debt service on capital investments thru the use of
certificate of participations, and seed orchard management.
AGENDA ITEM 2 Attachment 1 Page 67 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
2) Board of Forestry Lands
3) Combined
OREGON DEPT OF FORESTRY ‐ BOARD OF FORESTRY LANDS
Fiscal YrGross Acres
Managed
Total Timber
Harvest (Mbf)
Harvest Per
Acre Managed
(BdFt)
County Share
of Revenue
County
Revenue Per
Mbf
County
Revenue Per
Acre Managed
2008 697,883 236,578 339.0 51,183,661$ 216.35$ 73.34$
2009 657,710 236,912 360.2 42,472,866$ 179.28$ 64.58$
2010 657,710 236,142 359.0 42,572,163$ 180.28$ 64.73$
Average 671,101 236,544 352.5 45,409,563 191.97$ 69.05$
Source: State Forester's Annual CFTLC Report, Nov. 2010.
Rev. Transfers Total Costs
Fiscal Year
Timber Sales
and Forest
Product Sales
Revenue
Personal
Services
Services &
SuppliesCapital Outlay
FDF
Expenditures
C.C., COPS,
Seed Orchard,
Admin Prorate
FDF
Expenditures
and Revenue
Transfers
Timber Sales
Revenue of
Volume
Removed
Timber Harvest
Volume
Removed
(Mbf)
Total
Expeditures
Per MBF of
Harvest
Gross Acres
Managed
Total
Expenditures
Per Gross Acre
Managed
Total
Expenditures
as a Percent of
Total Revenues
2010 67,495,743$ 12,383,081$ 6,158,326$ 92,452$ 18,633,859$ 5,466,278$ 24,100,137$ 62,821,428$ 286,142 65.12$ 697,883 34.53$ 35.7%
2009 66,805,762$ 15,447,222$ 9,519,971$ 10,647$ 24,977,840$ 6,708,876$ 31,686,716$ 67,642,199$ 236,914 105.43$ 657,710 48.18$ 47.4%
2008 80,880,274$ 15,544,239$ 12,041,755$ 183,887$ 27,769,881$ 4,024,263$ 31,794,144$ 84,619,195$ 236,578 117.38$ 657,710 48.34$ 39.3%
2007 91,035,628$ 14,664,974$ 13,523,541$ 98,113$ 28,286,628$ (5,178,510)$ 23,108,118$ 98,287,294$ 244,398 115.74$ 657,657 35.14$ 25.4%
2006 93,135,149$ 13,529,064$ 10,915,862$ 243,984$ 24,688,910$ 5,607,473$ 30,296,383$ 103,150,843$ 276,908 89.16$ 657,657 46.07$ 32.5%
2005 77,202,726$ 13,376,102$ 9,628,632$ 138,624$ 23,143,358$ 21,713,270$ 44,856,628$ 89,542,266$ 281,655 82.17$ 657,657 68.21$ 58.1%
2004 75,588,318$ 11,777,213$ 7,273,545$ 199,663$ 19,250,421$ 2,194,087$ 21,444,508$ 81,104,304$ 239,386 80.42$ 657,657 32.61$ 28.4%
2003 72,590,895$ 11,395,363$ 7,130,232$ 417,631$ 18,943,226$ 3,065,141$ 22,008,367$ 86,875,185$ 253,532 74.72$ 657,657 33.46$ 30.3%
2002 69,114,134$ 10,686,593$ 5,695,832$ 708,570$ 17,090,995$ 3,990,047$ 21,081,042$ 79,544,382$ 228,326 74.85$ 657,657 32.05$ 30.5%
2001 66,647,019$ 10,046,233$ 6,053,184$ 269,558$ 16,368,975$ 2,689,368$ 19,058,343$ 65,489,876$ 193,069 84.78$ 657,657 28.98$ 28.6%
Average 76,049,565$ 12,885,008$ 8,794,088$ 236,313$ 21,915,409$ 5,028,029$ 26,943,439$ 81,907,697$ 247,691 88.98$ 657,669 40.97$ 35.4%
Source: State Forester's Annual CFTLC Report, Nov. 2010. Tables 4 and 5. Avg BdFt/Ac 377
FDF expenditures are those directly related to operational budget units that manage BOF lands
The Dept retains 36.25% of timber sale revenues for management of the state‐owned county trust lands (source: 2011‐13 budget presentation).
Revenue Transfers include: prorated portio of overall agency admin, capital improvement projects, debt service on capital investments thru the use of
certificate of participations, fire protection costs, and seed orchard management.
ODF FDF Expenditures
OREGON DEPT OF FORESTRY ‐ COMBINED MANAGEMENT OF COMMON SCHOOL FUND AND BOARD OF FORESTRY LANDS
Transfers Out Total Costs
Fiscal Year
Timber Sales
and Forest
Product Sales
Revenue
Personal
Services
Services &
SuppliesCapital Outlay
Special
Payments &
Other
Expenditures
Total
Expenditures
Admin Prorate,
Capital
Improvements,
COPS, Seed
Orchard, etc.
Direct
Expenditures
and Revenue
Transfers
Timber Sales
Revenue of
Volume
Removed
Timber Harvest
Volume
Removed
(Mbf)
Total
Expeditures
Per MBF of
Harvest
Gross Acres
Managed
Total
Expenditures
Per Gross Acre
Managed
Total
Expenditures
as a Percent of
Total Revenues
2010 77,141,805$ 14,590,794$ 7,434,472$ 96,859$ ‐$ 22,122,125$ 5,852,581$ 27,974,706$ 71,043,426$ 310,954 71.14$ 818,807 34.17$ 36.3%
2009 80,374,849$ 17,869,382$ 11,194,070$ 29,728$ ‐$ 29,093,180$ 7,485,407$ 36,578,587$ 80,061,982$ 266,201 109.29$ 780,935 46.84$ 45.5%
2008 90,721,712$ 17,879,470$ 13,733,849$ 198,214$ ‐$ 31,811,533$ 4,829,201$ 36,640,734$ 96,608,090$ 259,552 122.56$ 780,935 46.92$ 40.4%
2007 103,625,704$ 17,138,419$ 15,530,806$ 96,833$ (54)$ 32,766,004$ (4,230,695)$ 28,535,309$ 111,048,286$ 271,482 120.69$ 781,536 36.51$ 27.5%
2006 102,791,742$ 15,943,565$ 12,777,131$ 257,417$ ‐$ 28,978,113$ 6,544,409$ 35,522,522$ 110,760,501$ 294,741 98.32$ 781,536 45.45$ 34.6%
2005 96,294,906$ 15,720,668$ 11,316,431$ 155,457$ 34,193$ 27,226,749$ 22,751,179$ 49,977,928$ 109,622,438$ 323,761 84.10$ 781,536 63.95$ 51.9%
2004 90,948,391$ 13,920,629$ 8,779,969$ 337,893$ 30,802$ 23,069,293$ 3,075,239$ 26,144,532$ 95,364,754$ 271,906 84.84$ 781,536 33.45$ 28.7%
2003 81,140,895$ 13,538,108$ 8,697,320$ 420,102$ 50,167$ 22,705,697$ 3,726,006$ 26,431,703$ 97,868,157$ 277,842 81.72$ 781,536 33.82$ 32.6%
2002 82,785,627$ 12,663,815$ 7,081,906$ 732,212$ 68,574$ 20,546,507$ 4,796,465$ 25,342,972$ 93,587,499$ 257,883 79.67$ 781,536 32.43$ 30.6%
2001 83,434,120$ 12,032,266$ 7,296,245$ 282,187$ 171,314$ 19,782,012$ 3,429,527$ 23,211,539$ 84,721,692$ 229,690 86.12$ 781,536 29.70$ 27.8%
Average 88,925,975$ 15,129,712$ 10,384,220$ 260,690$ 35,500$ 25,810,121$ 5,825,932$ 31,636,053$ 95,068,683$ 276,401 93.85$ 785,143 40.29$ 35.6%
Percent 48% 33% 1% 0% 82% 18% 100%
Avg BdFt/Ac 352
Total
Expenditures
Per MBF of
Harvest
Total
Expenditures
Per Gross Acre
Managed
Total
Expenditures
as a Percent of
Total Revenues
Min 71.14$ 29.70$ 28%
Average 93.85$ 40.32$ 36%
Median 86.12$ 36.51$ 35%
Max 122.56$ 63.95$ 52%
Direct Expenditures
AGENDA ITEM 2 Attachment 1 Page 68 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
Washington DNR Data Tables
RCMA Upland Account Expenditures (Upland State Grant Lands)
Fiscal Year Expenditures* Gross AcresExpenditures per
AcreMbf Sold
BdFt Sold Per
Acre
Expenditures Per
Mbf Sold
2010 25,529,501$ 1,473,672 17.32$ 341,279 232 74.81$
2009 31,057,264$ 1,426,234 21.78$ 307,248 215 101.08$
2008 38,817,781$ 1,424,210 27.26$ 359,781 253 107.89$
2007 19,333,612$ 1,608,297 12.02$ 324,918 202 59.50$
2006 31,706,844$ 1,398,935 22.66$ 277,162 198 114.40$
*excludes capital expenditures
Forestland Development Account Expenditures (State Forest Transfer Lands)
Fiscal Year Expenditures Gross AcresExpenditures per
AcreMbf Sold
BdFt Sold Per
Acre
Expenditures Per
Mbf Sold
2010 35,552,694$ 592,203 60.03$ 400,387 676 88.80$
2009 24,243,403$ 583,532 41.55$ 238,386 409 101.70$
2008 23,872,258$ 584,142 40.87$ 300,466 514 79.45$
2007 25,532,785$ 687,403 37.14$ 245,465 357 104.02$
2006 23,652,281$ 588,558 40.19$ 250,447 426 94.44$
*excludes capital expenditures
Total Expenditures in RMCA and FDA Accounts
Fiscal Year Expenditures Gross AcresExpenditures per
AcreMbf Sold
BdFt Sold Per
Acre
Expenditures Per
Mbf Sold
2010 61,082,195$ 2,065,875 29.57$ 741,666 359 82.36$
2009 55,300,667$ 2,009,766 27.52$ 545,634 271 101.35$
2008 62,690,039$ 2,008,352 31.21$ 660,247 329 94.95$
2007 44,866,397$ 2,295,700 19.54$ 570,383 248 78.66$
2006 55,359,125$ 1,987,493 27.85$ 527,609 265 104.92$
Average 55,859,685$ 2,073,437 27.14$ 609,108 295 92.45$
*excludes capital expenditures
AGENDA ITEM 2 Attachment 1 Page 69 of 70
FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties
AGENDA ITEM 2 Attachment 1 Page 70 of 70