Strike everything after the enacting clause and insert the following:

"Sec. 1.  RCW 79.125.400 and 2005 c 155 s 506 are each amended to read as follows:

(1) ((Upon platting and appraisal of first-class tidelands or shorelands as provided in this chapter)) Except when the department is re-leasing first-class tidelands or shorelands under subsection (4) of this section, if the department deems it for the best public interest to offer ((the)) first-class tidelands or shorelands for lease, the department shall notify the owner of record of ((uplands)) the lands fronting upon the tidelands or shorelands to be offered for lease ((if the upland owner is a resident of the state, or the upland owner is a nonresident of the state, shall mail)) by mailing to the ((upland)) land owner's last known post office address, as reflected in the county records, a copy of the notice notifying the owner that the state is offering the tidelands or shorelands for lease, giving a description of those lands ((and the department's appraised fair market value of the tidelands or shorelands for lease)), and notifying the owner that the ((upland)) owner has a preference right to apply to lease the tidelands or shorelands ((at the appraised value for the lease for)). The owner has a period of sixty days from the date of service of mailing of the notice to exercise the preference by applying to lease the tidelands or shorelands.

(2) If at the expiration of sixty days from the service or mailing of the notice, as provided in subsection (1) of this section, there being no conflicting applications filed, and the owner of the ((uplands)) lands fronting upon the tidelands or shorelands offered for lease, has failed to avail themselves of their preference right to apply to lease ((or to pay to the department the appraised value for lease of the tidelands or shorelands described in the notice)), the tidelands or shorelands may be offered for lease to any person and may be leased in the manner provided for in the case of lease of state-owned aquatic lands.

(3) If at the expiration of sixty days two or more claimants asserting a preference right to lease have filed applications to lease any tract, conflicting with each other, the conflict between the claimants shall be equitably resolved by the department as the best interests of the state require ((in accord with the procedures prescribed by chapter 34.05 RCW)). However, any contract purchaser of lands or rights therein, which ((upland)) land qualifies the owner for a preference right under this section, shall have first priority for the preference right.

Sec. 2.  RCW 79.130.020 and 2005 c 155 s 602 are each amended to read as follows:

(1) The department shall, prior to the issuance of any lease under the provisions of this chapter, fix the annual ((rental)) rent and prescribe the terms and conditions of the lease. However, in fixing the ((rental)) rent, the department shall not take into account the value of any improvements placed upon the lands by the lessee.

(2) No lease issued under the provisions of this chapter shall be for a term longer than thirty years ((from the date thereof if in front of second-class tidelands or shorelands; or a term longer than ten years if in front of unplatted first-class tidelands or shorelands leased under the provisions of RCW 79.125.410, in which case the lease shall be subject to the same terms and conditions as provided for in the lease of the unplatted first-class tidelands or shorelands)). Failure to use those beds leased under the provisions of this chapter for booming purposes, for a period of two years shall work a forfeiture of the lease and the land shall revert to the state without notice to the lessee upon the entry of a declaration of forfeiture in the records of the department.

Sec. 3.  RCW 79.125.030 and 2005 c 155 s 502 are each amended to read as follows:

The department may survey and plat any ((second-class)) tidelands and shorelands not previously platted.

Sec. 4.  RCW 79.11.340 and 2003 c 334 s 399 are each amended to read as follows:

(1) Except as provided in RCW 79.10.030(2), the department shall manage and control all lands acquired by the state by escheat, deed of sale, gift, devise, or under RCW 79.19.010 through 79.19.110, except such lands that are conveyed or devised to the state for a particular purpose.

(2) When the department determines to sell the lands, they ((shall initially be)) must be either: (a) Offered for sale ((either)) at public auction ((or direct sale to public agencies)) as provided in this chapter((.

(3) If the lands are not sold at public auction, the department may,)); (b) offered for direct sale to public agencies as provided in RCW 79.17.200; or (c) with approval of the board, ((market the lands)) marketed through persons licensed under chapter 18.85 RCW or through other commercially feasible means at a price not lower than the land's appraised value.

(((4))) (3) Necessary marketing costs may be paid from the sale proceeds. For the purpose of this subsection, necessary marketing costs include reasonable costs associated with advertising the property and paying commissions.

(((5))) (4) Proceeds of the sale shall be deposited into the appropriate fund in the state treasury unless the grantor in any deed or the testator in case of a devise specifies that the proceeds of the sale be devoted to a particular purpose.

Sec. 5.  RCW 79.17.200 and 1992 c 167 s 2 are each amended to read as follows:

(1) For the purposes of this section, "public agency" means any agency, political subdivision, or unit of local government of this state including, but not limited to, municipal corporations, quasi-municipal corporations, special purpose districts, and local service districts; any agency of the state government; any agency of the United States; and any Indian tribe recognized as such by the federal government.

(2) With the approval of the board of natural resources, the department of natural resources may directly transfer or dispose of real property, without public auction, in the following circumstances:

(a) Transfers in lieu of condemnations;

(b) Transfers to public agencies; ((and))

(c) Transfers to resolve trespass and property ownership disputes; and

(d) Transfers of real property to a lessee that has continuously leased the real property directly from the department of natural resources for purposes of a home site since prior to the effective date of this section. This subsection (2)(d) does not apply to aquatic lands as defined by RCW 79.105.060, or to lessees that do not hold a lease for the real property directly with the department of natural resources.

(3) Real property to be transferred or disposed of under this section shall be transferred or disposed of only after appraisal and for at least fair market value, and only if such transaction is in the best interest of the state or affected trust.

NEW SECTION.  Sec. 6.  A new section is added to chapter 79.10 RCW to read as follows:

(1) Subject to the availability of funds appropriated for this specific purpose, the department of natural resources must conduct an asset valuation of state lands and state forestlands held in trust and managed by the department. The asset valuation required in subsections (3) and (4) may be provided through contracted services.

(2) The department must describe all trust lands, by trust, including timber lands, agricultural lands, commercial lands, and other lands, and identify revenues from leases or other sources for those lands. The department must briefly describe the income from these trust lands, and potential enhancements to income, including intergenerational income, from the asset bases of these trusts.

(3) The asset valuation must estimate the current fair market value of these lands for each trust beneficiary, including the separate beneficiaries of state lands as defined in RCW 79.02.010, and the beneficiaries of state forestlands as specified in chapter 79.22 RCW. The estimation of current fair market values must specify the values by the various asset classes, including but not limited to: Timber lands; irrigated agriculture; dryland agriculture, including grazing lands; commercial real estate; mining, and; other income production. The asset valuation must also estimate the value of ecosystem services and recreation benefits for asset classes that produce these benefits. The legislature encourages the department and its contractors to develop methods and tools to allow tracking of the estimated fair market values over time.

(4) For each of the different asset classes and for each of the various trusts, the asset valuation must calculate the average annual gross and net income as a percentage of estimated current asset value.

(5) The department must provide a progress report by December 1, 2018. A follow-up progress report must be provided by December 1, 2019 and may include any initial recommendations. The final report must be submitted by June 30, 2020 and must include options to:

(a) Improve the net rates of return on different classes of assets;

(b) Increase the reliability of, and enhance if possible, revenue for trust beneficiaries; and

(c) Present and explain factors that either (i) define, (ii) constrict, or (iii) define and constrict the department's management practices and revenue production. The factors to be considered include, but are not limited to: Statutory, constitutional, operational, and social.

(a) A summary of each lease and easement, including lease term, rental rate, and use conditions;

(b) A listing of annual revenues obtained from each lease and easement;

(c) A summary of the methods or formula used to value and establish payment for each type of lease and easement;

(d) A summary description of inspection and monitoring efforts completed over the previous ten years relating to compliance with the terms of the lease or easement as well as compliance with all applicable water quality and other local, state, or federal environmental, public health, and safety standards;

(e) A summary description of the applicable requirements for inspection and monitoring under the terms of the leases and easements as well as other applicable local, state, and federal regulatory requirements;

(f) A summary description of the lease and easement compliance activities performed by the department to ensure the protection of the state's aquatic resources, consistent with RCW 79.105.010, is maintained.

(2) The department of natural resources must submit the evaluation, including any recommendations for legislative or administrative actions, to the appropriate policy and fiscal committees of the senate and house of representatives by December 1, 2018.

Sec. 8.  RCW 79.64.110 and 2017 3rd sp.s. c 13 s 315, 2017 3rd sp.s. c 1 s 986, and 2017 c 248 s 6 are each reenacted and amended to read as follows:

(1) Any moneys derived from the lease of state forestlands or from the sale of valuable materials, oils, gases, coal, minerals, or fossils from those lands, except as provided in RCW 79.64.130, or the appraised value of these resources when transferred to a public agency under RCW 79.22.060, except as provided in RCW 79.22.060(4), must be distributed as follows:

(a) For state forestlands acquired through RCW 79.22.040 or by exchange for lands acquired through RCW 79.22.040:

(i) 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, must be returned to the forest development account created in RCW 79.64.100. During the 2015-2017 and 2017-2019 fiscal biennia, the board may increase the twenty-five percent limitation up to twenty-seven percent.

(ii) Any balance remaining must be paid to the county in which the land is located or, for counties participating in a land pool created under RCW 79.22.140, to each participating county proportionate to its contribution of asset value to the land pool as determined by the board. Payments made under this subsection are to be paid, distributed, and prorated, except as otherwise provided in this section, to the various funds in the same manner as general taxes are paid and distributed during the year of payment. A county may pay, distribute, and prorate payments made under this subsection of moneys derived from state forestlands acquired by exchange pursuant to section 3122, chapter 2, Laws of 2018, for the property identified in the LEAP capital document No. 2017-2H acquired through RCW 79.22.040 within the same county, in the same manner as general taxes are paid and distributed during the year of payment for the former state forestlands that were subject to the exchange.

(iii) Any balance remaining, paid to a county with a population of less than sixteen thousand, must first be applied to the reduction of any indebtedness existing in the current expense fund of the county during the year of payment.

(iv) With regard to moneys remaining under this subsection (1)(a), within seven working days of receipt of these moneys, the department shall certify to the state treasurer the amounts to be distributed to the counties. The state treasurer shall distribute funds to the counties four times per month, with no more than ten days between each payment date.

(b) For state forestlands acquired through RCW 79.22.010 or by exchange for lands acquired through RCW 79.22.010, except as provided in RCW 79.64.120:

(i) Fifty percent shall be placed in the forest development account.

(ii) Fifty percent shall be prorated and distributed to the state general fund, to be dedicated for the benefit of the public schools, to the county in which the land is located or, for counties participating in a land pool created under RCW 79.22.140, to each participating county proportionate to its contribution of asset value to the land pool as determined by the board, and according to the relative proportions of tax levies of all taxing districts in the county. The portion to be distributed to the state general fund shall be based on the regular school levy rate under RCW 84.52.065 (1) and (2) and the levy rate for any maintenance and operation special school levies. With regard to the portion to be distributed to the counties, the department shall certify to the state treasurer the amounts to be distributed within seven working days of receipt of the money. The state treasurer shall distribute funds to the counties four times per month, with no more than ten days between each payment date. The money distributed to the county must be paid, distributed, and prorated to the various other funds in the same manner as general taxes are paid and distributed during the year of payment.

(2) A school district may transfer amounts deposited in its debt service fund pursuant to this section into its capital projects fund as authorized in RCW 28A.320.330.

(1) RCW 79.125.020 (First-class tidelands and shorelands to be platted) and 2005 c 155 s 501 & 1982 1st ex.s. c 21 s 87; and

(2) RCW 79.125.410 (First-class unplatted tidelands and shorelands—Lease preference right to upland owners—Lease for booming purposes) and 2005 c 155 s 527 & 1982 1st ex.s. c 21 s 113."

Correct the title.