Sean C. Morgan
The Linn County Board of Commissioners plans to sue the State of Oregon for more than $1.4 billion in damages as part of a class action lawsuit for breach of contract for failure to properly manage forest policy and promote timber harvests on Forest Trust land.
The lawsuit class includes 14 other counties and more than 150 local districts, said Roger Nyquist, chairman of the Linn County Board of Commissioners, at a news conference at the state capitol.
“We’re here today in part because 75 years ago, many counties transferred lands to the state, so the Department of Forestry could manage those lands for the greatest permanent value to counties and the taxing districts in those counties.”
Commissioner John Lindsey said the lawsuit has been discussed for years.
“It was a question of who would be brave enough to pull the trigger. We’ve just hit a breaking point.”
It goes back to a time when a handshake was a man’s word, Lindsey said.
Rep. Sherrie Sprenger, R-Scio, who respresents Sweet Home, said she hopes the suit will trigger positive change for timber-dependent communities.
“I’ve seen firsthand the devastating impact the state’s forest management policy has had on our rural communities,” Sprenger said in a statement following the lawsuit announcement.
“I hope that this new effort, regardless of outcome, results in a shift in the way the state regulates and controls our natural resources and allows our rural communities to have more influence in that process. I firmly believe that greater local control of our forest and other natural resources will have positive benefits for communities in Linn County as well as those around the state.”
County counsel John DiLorenzo laid out the history that led up to the lawsuit, one of changing economics and political tides.
In the 1930s, timber lands were “burning up and otherwise abandoned,” he said.
“They were abandoned because it was the Great Depression, and the owners couldn’t afford to pay the taxes. The counties got the lands back through tax foreclosure, and of course, once they got the lands back, there was no one to pay taxes on them because they were no longer on the tax rolls. Plus, it was the Depression, and the counties didn’t have the money to manage them.
“Because many of these forests were ill-managed and burning, Gov. Charles A. Sprague in 1938, proposed an arrangement whereby the counties in their corporate capacity would actually deed the lands to the state. The state would in turn manage the land, deduct a management fee and then return to the counties the revenues that were produced by conducting timber operations on the lands.”
DiLorenzo said counties deeded their lands away after statutes were passed in the 1940s requiring that the state manage the lands in accordance with their “greatest permanent value.”
That was an undefined term at the time, DiLorenzo said, but he believes it meant that the state was supposed to establish a permanent financial return over time.
In 1986, the state decided to remove one property to convert it into a park in Tillamook County, DiLorenzo said. In the resulting court case, the state determined that a county could sue the state and that the county had an interest to protect. The land in in question was returned to timber production.
In 2005, the state legislature decided to use $10 million from the Forest Trust for other budget needs, DiLorenzo said. The judge in that case determined that the state had a contract with the counties, and the $10 million was returned to the Forest Trust.
In 1998, the Department of Forestry adopted a new rule de-emphasizing revenue generation for the counties in exchange for other objectives without the consent of the counties, Nyquist said.
The Board of Forestry defined the greatest permanent value beyond economics and began considering ecological returns, aesthetics, recreation and other interests, DiLorenzo said. The state implemented a management regime different from what a private landowner would do, ultimately under-utilizing the property economically.
Nyquist said the arrangement established after the Depression was confirmed as a contract by the Supreme Court.
“It’s a contract, and the Department of Forestry has breached that contract.
“These counties have been deprived of $35 million a year, which otherwise would have been theirs had the state been managing these timber lands as a landowner should, complying with all the overlays, Forest Practices Act, the Endangered Species Act and the like.”
Each year, Nyquist said, he works on a budget that increases by 5 to 7 percent while, under property tax limitations, tax revenue grows by about 3 percent per year.
Every year, the county has to reinvent itself 2 percent less than it was the prior year, Nyquist said. “For us, this is about a $2 million-per-year ongoing issue that we feel like we’ve been deprived of. The rural communities of Linn County, their local economies have been devastated. Unemployment rates, poverty have skyrocketed, not in small part because of current practices, and for them it’s just not right. It’s not OK.
“We’ve heard a lot of conversations about the plight of rural Oregon by statewide policymakers, but there has been nothing, there’s been no one to address the underlying fundamental problems and that is we’re not managing things in a way that serves their financial interests and stimulating their local economies.”
Local districts have received funds from the Forest Trust in lieu of property taxes they might receive were the land privately owned.
“All of these local districts are desperately in need of funds, especially in the area of public safety, and all of them would be greatly benefited,” DiLorenzo said. “In fact, lives would be vastly improved if those monies were provided to these districts and if the residents were permitted to re-engage in the employment they have lost that would be provided if the state were honoring this contract as the parties bargained.”
This lawsuit is an action step to correct that, Nyquist said.
Total, the lawsuit identifies past damages of more than $528 million, about $35 million per year from 2001 to 2014, DiLorenzo said. The lawsuit also lists about $25 million in interest.
The state has the option of breaching the contract, DiLorenzo said, but it has to pay the value value of the contract, estimated at more than $881 million, a total of about $1.4 billion.
“The citizens have suffered greatly over the years, DiLorenzo said. The costs of this decision fall disproportionately on the citizens of the 15 counties, and the social costs cannot be calculated.
“I believe the state has known for quite some time there has been a soft underbelly to its position,” DiLorenzo said. “And I believe Linn County has found that soft underbelly.”
The state has 30 days to cure the problem or the county can move forward with the lawsuit, DiLorenzo said. The county cannot file the lawsuit before then. Once the lawsuit if filed, then he can file a motion to certify the class. After that, other counties and local districts could ride along or opt out, retaining their own right to sue.
Affected local districts include libraries, schools, law enforcement, 4-H, towns and more, DiLorenzo said.
The lawsuit’s claim for $1.4 billion is an estimate based partially on the state’s own models for valuing timber production, DiLorenzo said.
According to those figures, Linn County is receiving some $3.1 million per year, while foregoing $2.4 million per year. Linn County represents 6.77 percent of the total.
Clatsop and Tillamook counties represent 34.12 percent and 25.29 percent respectively, with more than half of the total damages and annual revenue at stake.