oregon department of forestry state financial viability ... · final – 12/07/2012 page 1 oregon...

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Final – 12/07/2012 Page 1 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 stateowned 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 longheld 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 selfsustaining, with the vast majority of its revenue derived from a portion of timber sale receipts. Twothirds 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 nearrecord 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 precommercial 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

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Page 1: Oregon Department of Forestry State Financial Viability ... · Final – 12/07/2012 Page 1 Oregon Department of Forestry State Forest Financial Viability Work Group Final Report Executive

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

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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. 

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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 

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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

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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

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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.      

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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.  

 

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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.   

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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).   

 

 

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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 

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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). 

 

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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. 

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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. 

 

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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 

 

 

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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. 

 

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Figure 1. July 2011 – September 9, 2011 

  

 

 

 

 

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Figure 2.  January 2012 

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Figure 3.   July 2012 Revenue Projection (Revised September 2012) 

 

  

 

 

 

 

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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. 

 

 

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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. 

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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. 

 

 

 

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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.   

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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 

 

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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. 

 

 

 

 

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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;  

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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.   

 

 

 

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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). 

 

  

 

 

 

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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. 

 

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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. 

 

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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 

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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. 

 

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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. 

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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   

 

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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. 

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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  

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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.         

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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

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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. 

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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

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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 

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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 

 

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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.

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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*

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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? 

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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. 

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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. 

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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 

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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 

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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 

 

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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.  

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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. 

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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.   

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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) 

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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.   

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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. 

  

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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.

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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.

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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.

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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 

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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 

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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.

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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.

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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

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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

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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.

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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

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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

Page 70: Oregon Department of Forestry State Financial Viability ... · Final – 12/07/2012 Page 1 Oregon Department of Forestry State Forest Financial Viability Work Group Final Report Executive

FeasibilityAnalysisforO&CCounties AppendixEAttachment 13 – MB&G Report – Management Cost Analysis to O&C Counties

AGENDA ITEM 2 Attachment 1 Page 70 of 70