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AGO 1987 No. 10 - March 20, 1987
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Ken Eikenberry | 1981-1992 | Attorney General of Washington

STATE ‑- COUNTY DEEDED FOREST LANDS ‑- TRUST ‑- AGENCY FLAT RATE OF RETURN ‑- SETTLEMENT PROCEEDS FROM TIMBER SALE LITIGATION

 RCW 76.12.030 does not establish a separate trust for each county with reference to the lands deeded by each county to the DNR for state forest lands.

 RCW 76.12.030(1) does authorize the Board of Natural Resources to establish a flat rate of return to the forest development account of twenty-five percent of any moneys derived from DNR transfer land leases and resource sales.

 Settlement proceeds from timber sale litigation are properly distributed to the forest development account pursuant to RCW 76.12.030(12).

                                                                - - - - - - - - - - - - -

                                                                    March 20, 1987

Honorable Brian Boyle
Commissioner of Public Lands
Department of Natural Resources
Olympia, Washington 98504 

Cite as:  AGO 1987 No. 10                                                                                                                

 Dear Sir:

             By letter previously acknowledged, you have requested our opinion on three questions concerning RCW 76.12.030.  For ease of understanding, we preface your questions and our analysis of them with a brief overview of RCW 76.12.030.

            RCW 76.12.030 governs lands acquired by counties through tax lien foreclosures and transferred to the Department of Natural Resources (DNR) for state forest lands.1/

             It addresses the manner in which these lands are to be held and administered.  The statute also establishes a scheme for distributing proceeds from leases of these lands and from the sale of forest products and other resources derived from these lands.  RCW 76.12.030 provides:

             If any land acquired by a county through foreclosure of tax liens, or otherwise, comes within the classification  [[Orig. Op. Page 2]] of land described in RCW 76.12.020 and can be used as state forest land and if the board deems such land necessary for the purposes of this chapter, the county shall, upon demand by the board, deed such land to the board and the land shall become a part of the state forest lands, and upon such deed being made the commissioner of public lands shall be notified and enter and note it upon the records of his office.

             Such land shall be held in trust and administered and protected by the board as other state forest lands.2/

           Any moneys derived from the lease of such land or from the sale of forest products, oils, gases, coal, minerals, or fossils therefrom, shall be distributed as follows:

             (1) The expense incurred by the state for administration, reforestation, and protection, not to exceed twenty-five percent, which rate of percentage shall be determined by the board of natural resources, shall be returned to the forest development account in the state general fund:  Provided, That for moneys received as deposits from successful bidders, advance payments, and security under RCW 79.01.132 and 79.01.204 prior to December 1, 1981, and not distributed under this section prior to December 1, 1981, an amount not to exceed fifty percent, which rate of percentage shall be determined by the board of natural resources, shall be returned to the forest development account in the state general fund.

             (2) Any balance remaining shall be paid to the county in which the land is located to be paid, distributed, and prorated, except as hereinafter provided, to the various funds in the same manner as general taxes are paid and distributed during the year of payment:  Provided, That any such balance remaining paid to a county of the seventh, eighth, or ninth class shall first be applied to the reduction of any indebtedness existing in the current expense fund of such county during the year of payment.

 [[Orig. Op. Page 3]]

                                                                    QUESTIONS

             With this background in mind, we turn to the questions you have posed.  We have paraphrased and reordered them as follows:

             1.         Does RCW 76.12.030 establish a separate trust for each county with reference to the lands deeded by each county to the DNR for state forest lands?

             2.         Does RCW 76.12.030(1) authorize the Board of Natural Resources to establish a flat rate of return to the forest development account of twenty-five percent of any moneys derived from DNR transfer land leases and resource sales?

             3.         Are settlement proceeds from timber sale litigation properly distributed to the forest development account pursuant to RCW 76.12.030(1)?

             We answer your first question in the negative and your second and third questions in the affirmative for the reasons set forth in the following analysis.

                                                                      ANALYSIS

             Your first question concerns the nature of the trust referred to in RCW 76.12.030.  This section states in part:  "Such land shall be held in trust and administered and protected by the board as other state forest lands."  We do not read RCW 76.12.030 as establishing a separate trust of DNR transfer lands for the benefit of each transferring county.  Our view stems not only from the absence of any language in RCW 76.12.030 specifically creating separate trusts,3/ but also from the character of the lands deeded by the counties to the DNR and the legal relationship between the counties and those lands, prior to their transfer to the DNR.

 [[Orig. Op. Page 4]]

             As previously noted, the lands about which you inquire were obtained by the various counties through the foreclosure of tax liens as part of the statutory tax collection process.4/

             See RCW 84.64.200.  Our courts have recognized on numerous occasions that:

             The title acquired by the county in property at a general tax foreclosure sale becomes vested in the county, not in its proprietary capacity, but in trust for the state and for the other taxing municipalities within which the land is situated, with power and obligation on the part of the county to sell the land and fairly apportion the proceeds to the state, municipal, and other funds entitled thereto.

 State ex rel. Seattle v. King Cy., 4 Wn.2d 589, 597, 104 P.2d 575 (1940).

             In other words, the counties held these lands not as proprietary owners, but as trustees for the various taxing districts, including the state, with an obligation to sell the lands and distribute sale proceeds to the appropriate funds.  See Commercial Waterway Dist. 1 v. King Cy., 10 Wn.2d 474, 117 P.2d 189 (1941); RCW 84.64.230, 84.64.310.

             In our view, enactment of RCW 76.12.030 did not alter the fundamental nature of the trust in which these lands were held.5/

             They were held in trust for the various tax funds before they were deeded to DNR.  They remain so held.  The nature and purpose of the trust has not materially changed.

             In this respect, we adhere to the view we expressed in AGO 1968 No. 10, where we considered the nature of the funds entitled to state forest land distributions under RCW 76.12.030.  There we said:

              [[Orig. Op. Page 5]]

             When the legislature, by enactment of RCW 76.12.030, directed that tax title lands chiefly valuable for timber should be taken over and administered by the state forest board (now the department of natural resources), the transfer was not intended as a device to revise the trust under which such lands were held.  On the contrary, the transfer was intended as a management plan under which the existing trusts would be better served through utilization of the state's professional forestry resources and services.  Indeed, revision of the trust, if intended, would have introduced unnecessary and undesirable complexity in the administration of the tax statutes.  Avoidance of such complexity is alone reason for interpreting "general taxes" (as used in RCW 76.12.030 and 76.12.120) so as to include excess levies within the distribution formula for state forest land revenues.

 AGO 1968 No. 10, at 8 (footnote omitted).

             The nature and purpose of the trust being so, we can conceive of no reason for concluding that the trust language contained in RCW 76.12.030 creates an individual trust for the benefit of each county.6/

             The counties' role in this tax collection process (and the DNR-managed trust that now furthers it) simply is to facilitate distribution of DNR transfer land moneys to the various funds entitled to them.7/

              [[Orig. Op. Page 6]]

             Your second question, repeated here for ease of reference, asks:

             Does RCW 76.12.030(1) authorize the Board of Natural Resources to establish a flat rate of return to the forest development account of twenty-five percent of any moneys derived from DNR transfer land leases and resource sales?

             RCW 76.12.030 addresses the authority of the Board of Natural Resources in the following language:

             Any moneys derived from the lease of such land or from the sale of forest products, oils, gases, coal, minerals, or fossils therefrom, shall be distributed as follows:

             (1) The expense incurred by the state for administration, reforestation, and protection, not to exceed twenty-five percent, which rate of percentage shall be determined by the board of natural resources, shall be returned to the forest development account in the state general fund:  Provided, That for moneys received as deposits from successful bidders, advance payments, and security under RCW 79.01.132 and 79.01.204 prior to December 1, 1981, and not distributed under this section prior to December 1, 1981, an amount not to exceed fifty percent, which rate of percentage shall be determined by the board of natural resources, shall be returned to the forest development account in the state general fund.

             In our view, this language is ambiguous.  On the one hand, it refers to "[t]he expense incurred by the state for administration, reforestation, and protection".  On the other hand, it seemingly authorizes the Board of Natural Resources to establish a "rate of percentage" for return to the forest development account.  Thus, the statute leaves open to interpretation whether the Board (a) may return to the forest development account only the actual expenses of managing the lands in question, up to a maximum of twenty-five percent of the proceeds from land leases and resource sales, or (b) is authorized to establish for return to the account a fixed rate of up to twenty-five percent of the lease and sale proceeds, without regard to the actual expenses of managing the lands in question.

             The primary objective in interpreting statutes is to ascertain and give effect to the intent of the Legislature.  Bellevue Fire

 [[Orig. Op. Page 7]]Fighters Local 1604 v. Bellevue, 100 Wn.2d 748, 675 P.2d 592 (1984), cert. denied, 471 U.S. 1015 (1985).  Legislative history is an appropriate source for determining legislative intent.  State v. Frampton, 95 Wn.2d 469, 627 P.2d 922 (1981).

             We believe the legislative history of RCW 76.12.030 discloses a clear intent to authorize the Board to return to the forest development account up to twenty-five percent of the amounts derived from DNR transfer land leases and resource sales, unrestricted by the actual expenses incurred in managing the particular lands in question.  We turn now to that history.

             RCW 76.12.030 is derived from section 3, chapter 288, Laws of 1927, which contained the following distribution provisions:

           Any monies derived from the lease of such lands or from the sale of forest products, oils, gases, coal, minerals or fossils therefrom, shall be distributed as follows:

                  (a) The expense incurred by the state for administration, reforestation and protection, shall be returned to the general fund of the state treasury.

                  (b) Ten per centum thereof shall be placed in the forest development fund of the state treasury.

                  (c) Any balance remaining shall be paid to the county in which the lands are located to be paid, distributed and pro-rated to the various funds in the same manner as general taxes are paid and distributed during the year of such payment.

             Under this initial statutory scheme, the State's management expenses were recouped from the land lease and resource sale proceeds and returned to the general fund.  Significantly, an additional ten percent of those proceeds was placed in the forest development fund.8/

             Thus, as originally established, the  [[Orig. Op. Page 8]] distribution scheme contemplated that money in addition to actual management expenses would be withheld from DNR transfer land lease and resource sale proceeds.

             The distribution provisions of RCW 76.12.030 were next amended by section 1, chapter 91, Laws of 1951.  As so amended, they provided:

             Any moneys derived from the lease of such land or from the sale of forest products, oil, gases, coal, minerals, or fossils therefrom, shall be distributed as follows:

                  (1) The expense incurred by the state for administration, reforestation, and protection, not to exceed ten per cent, shall be returned to the forest development fund of the state treasury.

                  (2) Ten per cent thereof shall be placed in the forest development fund of the state treasury.

                  (3) Any balance remaining shall be paid to the county in which the land is located to be paid, distributed, and prorated to the various funds in the same manner as general taxes are paid and distributed during the year of payment.

             During the same legislative session, appropriations from the forest development fund were authorized to carry on the activities of the State Forest Board, the statutory predecessor of the DNR.  Laws of 1951, ch. 149.9/

             Thus, in 1951, the Legislature effectively reconstituted the forest development fund as a revolving fund, to finance the activities of the State Forest Boar-, now the DNR.  In so doing, the Legislature continued to authorize withholding moneys in excess of actual management expenses from DNR transfer land lease and resource sale proceeds.

             For purposes of our analysis, the next significant amendment of the distribution provisions of RCW 76.12.030 took place in 1971.  As amended in 1971, the distribution scheme provided:

              [[Orig. Op. Page 9]]

             Any moneys derived from the lease of such land or from the sale of forest products, oils, gases, coal, minerals, or fossils therefrom, shall be distributed as follows:

                         (1) The expense incurred by the state for administration, reforestation, and protection, not to exceed twenty-five percent, which rate of percentage shall be determined by the board of natural resources, shall be returned to the forest development account in the state general fund.

                         (2) Any balance remaining shall be paid to the county in which the land is located to be paid, distributed, and prorated, except as hereinafter provided, to the various funds in the same manner as general taxes are paid and distributed during the year of payment:  PROVIDED, That any such balance remaining paid to a county of the seventh, eighth, or ninth class shall first be applied to the reduction of any indebtedness existing in the current expense fund of such county during the year of payment.

 Laws of 1971, 1st Ex. Sess., ch. 224, § 1, p. 1019.10/

             As you will recall, prior to this 1971 amendment, RCW 76.12.030 contained two separate sections providing for distributions to the forest development account.  The first section provided that expenses of administration, reforestation, and protection, not to exceed ten percent of DNR transfer land lease and resource sale proceeds, should be returned to the forest development account.  The second section provided for the return of an additional ten percent of such proceeds to the forest development account.

             The 1971 amendment effectively combined these provisions and increased the amount of DNR transfer land lease and resource sale proceeds returnable to the forest development account to an upper limit of twenty-five percent of these proceeds.

             That such an increase was the intent of the Legislature is evident not only from the longstanding history of returning to the forest development account amounts in excess of actual management  [[Orig. Op. Page 10]] expenses, but also from comments on House Bill 477, 42d Legislature (1971) on the floor of the House of Representatives and Senate.

             Representative Thompson spoke in favor of House Bill 477 on final passage, explaining the measure as follows:

             House Bill 477 increases the ceiling from twenty to twenty-five percent on state land income retained by the Department of Natural Resources for management purposes.  It also raises the limit on transactions involving tidelands and the beds of navigable streams to fifty percent.  These retained moneys are used for reforestation, protection, and administration.  The Department has built a good case in the advocacy of this bill and has shown to the satisfaction of the affected agencies, educational interests, and local government that this additional investment in management will return a greater rate of income for these purposes.  This is indicated by the fact that one of the sponsors of this measure is superintendent Brouillet.  There will be additional moneys for schools and local government, if you'll support this measure.

 SeeHouse Journal, 42d Legislature (1971), at 913.11/

             A similar intent to increase the share of DNR transfer land lease and resource sale proceeds returnable to the forest development account, unrestricted by actual expenses, is evident from the following remarks of Senator Peterson, on final passage of House Bill 477 in the Senate:

             This relates to the distribution of income received from the lease or sale of forest lands acquired by the State from the counties as a result of tax foreclosures.  It permits the Board of Natural Resources to increase the deduction from the gross receipts for management costs in the present twenty percent to a maximum of twenty-five percent.  It also increases the shorelines up to the maximum of fifty percent.  This measure is needed by the Department to increase the yield of timber, primarily, from State‑owned lands and they could utilize it in this  [[Orig. Op. Page 11]] measure and it ultimately would be of benefit to the State.

 SeeSenate Journal, 42d Legislature (1971), at 1503-04.12/

             We believe that the current statutory scheme, when considered in light of this legislative history, clearly continues a longstanding authorization to return to the forest development account proceeds from DNR transfer land leases and resource sales, unrestricted by the actual expense of managing the particular DNR transfer lands from which the proceeds are derived.13/

             We accordingly conclude that RCW 76.12.030 authorizes the Board of Natural Resources to establish a flat rate of return to the forest development account in an amount not to exceed twenty-five percent of the moneys derived from DNR transfer land leases and resource sales.

             We turn now to your third and final question, which we repeat here for ease of reference.

             Are settlement proceeds from timber sale litigation properly distributed to the forest development account pursuant to RCW 76.12.030(1)?

             RCW 76.12.030 provides for distribution to the forest development account and the various tax funds of "[a]ny moneys  [[Orig. Op. Page 12]] derived from the lease of such land or from the sale of forest products, oils, gases, coal, minerals, or fossils therefrom . . . ."  Thus, to answer your question, we must determine whether settlement proceeds from timber sale litigation constitute "moneys derived from . . . the sale of forest products".  This requires us to identify the source of those settlement proceeds.

             It seems evident to us that timber sale settlement proceeds would not exist, absent the sale of timber.  Certainly, the mere ownership or existence of timber does not give rise to such proceeds.  The sale of timber generates such moneys.  We can identify no other source from which those proceeds are derived.  Accordingly, we conclude that the source‑-the derivation‑-of timber sale litigation proceeds is "the sale of forest products" and that, consequently, those moneys are properly distributed to the forest development account and the various tax funds, as provided in RCW 76.12.030(1) and (2).

             We trust that the foregoing will be of assistance to you.

 Very truly yours,
KENNETH O. EIKENBERRY
Attorney General

MAUREEN HART
Assistant Attorney General

                                                         ***   FOOTNOTES   ***

 1/We will refer to these lands as DNR transfer lands.

 2/The "board" referred to in the first two paragraphs of RCW 76.12.030 is the State Forest Board.  That Board was abolished in 1957.  Its powers and duties were transferred to the DNR.  Laws of 1957, ch. 38.  In this opinion, we refer to the State Forest Board's successor, the DNR, in identifying the recipient of these lands.

 3/The absence of statutory language in RCW 76.12.030 creating individual county trusts is in sharp contrast to the specific language in RCW 79.64.030 identifying separate federal grant land trusts.

 4/The DNR has verified that all DNR transfer lands initially were tax title lands.

 5/We note, however, that the obligation of sale does not apply to the tax title lands deeded to the DNR by the counties.  RCW 76.12.120 forbids the sale of DNR transfer lands, but authorizes the lease of these lands and the sale of timber and other products from them.

 6/In contrast to the single trust established under RCW 76.12.030, individual trusts are created by RCW 76.12.035.  Under that provision, former tax title lands purchased by the county from the federal government and held by the DNR as state forest lands are held in trust "for such county".  In our view, this separate trust treatment properly reflects the proprietary ownership of such lands by the county‑-a proprietary ownership lacking with reference to the lands about which you inquire.

 7/Not all boundaries of taxing districts benefited by a distribution of DNR transfer land revenues under RCW 76.12.030(2) are coextensive with county boundaries.  This underscores the insignificance of the county geographical unit in this trust.

 8/This fund is the statutory forerunner of the forest development account, currently referred to in RCW 76.12.030.  See Laws of 1969, ch. 110, § 1, p. 322.  Until 1951, the forest development fund was pledged for the sole purpose of paying principal and interest on bonds issued to finance the purchase of state forest lands.  Laws of 1923, ch. 154, § 6, p. 497; Laws of 1951, ch. 149, § 1, p. 410.

 9/As previously noted, prior to 1951, the forest development fund had been pledged solely to finance the acquisition of state forest lands.

 10/Insofar as it is relevant to your inquiry, the 1971 version of RCW 76.12.030 is identical to the current version.

 11/Representative Thompson's remarks are taken from a tape recording of floor action on House Bill 477, maintained by the minute‑journal clerk of the House of Representatives.

 12/Senator Peterson's remarks are taken from a tape recording of floor action on House Bill 477, maintained by the minute‑journal clerk of the Senate.

 13/Our interpretation is consistent with the construction given this provision by the Board of Natural Resources since 1971.  Although the Legislature amended RCW 76.12.030(1) in 1981, it did not repudiate the Board's interpretation of RCW 76.12.030(1) as authorizing the establishment of a flat rate percentage, not in excess of twenty-five percent of the DNR transfer land lease or resource sale proceeds.  Laws of 1981, 2d Ex. Sess., ch. 4, § 4, p. 10.  The failure of the Legislature to repudiate the Board's consistent construction of RCW 76.12.030 may be viewed as additional evidence of legislative intent with reference to that provision.  Green River Comm'ty College v. Higher Educ. Personnel Bd., 95 Wn.2d 108, 622 P.2d 826 (1980),modified, 95 Wn.2d 962, 633 P.2d 1324 (1981).

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