Z-0798.1  _______________________________________________

                          HOUSE BILL 1847

          _______________________________________________

State of Washington      57th Legislature     2001 Regular Session

By Representatives Pennington, Doumit and Mielke; by request of Department of Natural Resources

Read first time 02/06/2001.  Referred to Committee on Natural Resources.

Streamlining the process of selling valuable materials from state lands.

    AN ACT Relating to improving the business practices associated with selling valuable materials on trust land; amending RCW 79.01.084, 79.01.116, 79.01.124, 79.01.132, 79.01.160, 79.01.184, 79.01.188, 79.01.204, 79.01.232, 79.01.240, 79.01.340, 79.01.392, 79.01.795, 79.64.030, 79.64.040, and 79.64.050; and adding a new section to chapter 79.01 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

    Sec. 1.  RCW 79.01.084 and 1982 1st ex.s. c 21 s 150 are each amended to read as follows:

    The commissioner of public lands shall cause to be prepared, and furnish to applicants, blank forms of applications for the appraisal, transfer, and purchase of any state lands and the purchase of ((timber, fallen timber, stone, gravel, or other)) valuable materials situated thereon, and for the lease of state lands((, which)).  These forms shall contain ((such)) instructions ((as will)) to inform and aid ((intending)) applicants ((in making applications)).

    Sec. 2.  RCW 79.01.116 and 1982 1st ex.s. c 21 s 152 are each amended to read as follows:

(1) In no case shall any lands granted to the state be offered for sale unless the same shall have been appraised by the board of natural resources within ninety days prior to the date fixed for the sale((, and in no case shall any other state lands, or any materials on any state lands, be offered for sale unless the same shall have been appraised by the commissioner of public lands within ninety days prior to the date fixed for the sale)).

(2) For the sale of valuable materials from state land under this title, if the board of natural resources is required by law to appraise the sale, the board must establish a minimum appraisal value that is valid for a period of one hundred eighty days, or a longer period as may be established by resolution.  The board may reestablish the minimum appraisal value at any time.  For any valuable materials sales that the board is required by law to appraise, the board may by resolution transfer this authority to the commissioner of public lands.

(3) Where the board of natural resources has set a minimum appraisal value for a valuable materials sale, the commissioner of public lands may set the final appraisal value of valuable materials for auction, which must be equal to or greater than the board of natural resources' minimum appraisal value.  The commissioner may also appraise any valuable materials sale not required by law to be approved by the board of natural resources.

    Sec. 3.  RCW 79.01.124 and 1982 1st ex.s. c 21 s 154 are each amended to read as follows:

    ((Timber, fallen timber, stone, gravel, or other)) Valuable material situated upon state lands may be sold separate from the land, when in the judgment of the commissioner of public lands, it is for the best interest of the state so to sell the same((, and in case the estimated amount of timber on any tract of state lands, shall exceed one million feet to the quarter section, the timber shall be sold separate from the land)).  When application is made for the purchase of any valuable materials ((situated upon state lands, the same inspection and report shall be had as upon an application for the appraisement and sale of such lands, and)), the commissioner of public lands shall appraise the value of the valuable materials ((applied for)) if the commissioner determines it is in the best interest of the state to sell.  No ((timber, fallen timber, stone, gravel, or other)) valuable materials((,)) shall be sold for less than the appraised value thereof.

    Sec. 4.  RCW 79.01.132 and 1999 c 51 s 1 are each amended to read as follows:

(1) When ((any timber, fallen timber, stone, gravel, or other)) valuable materials on state lands ((is)) are sold separate from the land, ((it)) they may be sold as a lump sum sale or as a scale sale.  Lump sum sales under five thousand dollars appraised value shall be paid for in cash on the day of sale.  The initial deposit shall be maintained until all contract obligations of the purchaser are satisfied.  However, all or a portion of the initial deposit may be applied as the final payment for the valuable materials in the event the department of natural resources determines that adequate security exists for the performance or fulfillment of any remaining obligations of the purchaser under the sale contract.

(2) The initial deposits required in RCW 79.01.204((,)) may not ((to)) exceed twenty-five percent of the actual or projected purchase price, but in the case of lump sum sales appraised at over five thousand dollars the initial deposit may not be less than five thousand dollars, and shall be made on the day of the sale((, and in the case of)).  For those sales appraised below the amount specified in RCW 79.01.200, the department of natural resources may require full cash payment on the day of sale.

(3) The purchaser shall notify the department of natural resources before any ((timber is cut and before removal or processing of any valuable materials on the sale area, at which time)) operation takes place on the sale site.  Upon notification, the department of natural resources ((may)) shall determine and require((, in the amount determined by the department,)) advance payment for the cutting, removal, or processing((, and/or cutting)) of ((timber or other)) the valuable materials, ((or)) or may allow purchasers to guarantee payment by submitting as adequate security bank letters of credit, payment bonds, ((or)) assignments of savings accounts, assignments of certificates of deposit, or other methods acceptable to the department as adequate security.  The amount of such advance payments and/or security shall be determined by the department and at all times equal or exceed the value of timber cut and other valuable materials processed or removed until paid for.  ((The initial deposit shall be maintained until all contract obligations of the purchaser are satisfied:  PROVIDED HOWEVER, That all or a portion of said initial deposit may be applied as the final payment for said materials in the event the department of natural resources determines that adequate security exists for the performance or fulfillment of any remaining obligations of the purchaser under the sale contract.))

(4) In all cases where ((timber, fallen timber, stone, gravel, or other)) valuable materials ((is)) are sold separate from the land, the same shall revert to the state if not removed from the land within the period specified in the sale contract.  ((Said)) The specified period shall not exceed five years from the date of the purchase thereof:  PROVIDED, That the specified periods in the sale contract for stone, sand, fill material, or building stone shall not exceed ((twenty)) thirty years((:  PROVIDED FURTHER, That)).

(5) In all cases where, in the judgment of the department of natural resources, the purchaser is acting in good faith and endeavoring to remove such materials, the department of natural resources may extend the time for the removal thereof for any period not exceeding ((twenty)) forty years from the date of purchase for the stone, sand, fill material, or building stone or for a total of ten years beyond the normal termination date specified in the original sale contract for all other material((,)).  Extension of a contract is contingent upon payment to the state of a sum to be fixed by the department of natural resources, based on the estimated loss of income per acre to the state resulting from the granting of the extension ((but)).  In no event may the extension payment be less than fifty dollars per extension, plus interest on the unpaid portion of the contract.  The interest rate shall be fixed, from time to time, by rule adopted by the board of natural resources and shall not be less than six percent per annum.  The applicable rate of interest as fixed at the date of sale ((and)), the maximum extension payment ((shall be set forth in the contract.)), and the method for calculating the unpaid portion of the contract upon which such interest shall be paid by the purchaser shall be set forth in the contract.  The department of natural resources shall pay into the state treasury all sums received for such extension and the same shall be credited to the fund to which was credited the original purchase price of the material so sold.

    ((However,)) (6) A direct sale of valuable materials may be sold to the applicant for cash at full appraised value without notice or advertising.  The board of natural resources shall, by resolution, establish the value amount of a direct sale not to exceed twenty thousand dollars in appraised sale value, and establish procedures to assure that competitive market prices and accountability will be guaranteed.

(7) The department may, in addition to any other securities, require a performance security to guarantee compliance with all contract requirements.  The security is limited to those types listed in subsection (3) of this section.  The value of the performance security will, at all times, equal or exceed the value of work performed or to be performed by the purchaser.

(8) Any time that the department of natural resources sells timber by contract that includes a performance bond, the department shall require the purchaser to present proof of any and all taxes paid prior to the release of the performance bond.  Within thirty days of payment of taxes due by the timber purchaser, the county treasurer shall provide certified evidence of taxes paid, clearly disclosing the sale contract number.

(9) The provisions of this section apply unless otherwise provided by statute.  The board of natural resources shall establish procedures to protect against cedar theft and to ensure adequate notice is given for persons interested in purchasing cedar.

    Sec. 5.  RCW 79.01.160 and 1959 c 257 s 15 are each amended to read as follows:

    All sales of ((timber)) valuable materials upon state lands shall be made subject to the right, power, and authority of the commissioner of public lands to prescribe rules ((and regulations)) or procedures governing the manner of the sale and removal of the ((timber with a view to the protection of the nonmerchantable timber against destruction or injury by fire or from other causes, and)) valuable materials.  Such ((rules or regulations)) procedures shall be binding ((upon the)) when contained within a purchaser's ((of the timber)) contract for valuable materials and ((his)) apply to the purchaser's successors in interest and shall be enforced by the commissioner of public lands.

    Sec. 6.  RCW 79.01.184 and 1997 c 116 s 2 are each amended to read as follows:

    When the department of natural resources shall have decided to sell any state lands or valuable materials thereon, or with the consent of the board of regents of the University of Washington, or by legislative directive, shall have decided to sell any lot, block, tract, or tracts of university lands, or the ((timber, fallen timber, stone, gravel, or other)) valuable materials thereon, it shall be the duty of the department to ((forthwith)) fix the date, place, and time of sale, and no sale shall be had on any day which is a legal holiday.

    The department shall give notice of the sale by advertisement ((published not less than two times during a four week period prior to the time of sale in at least one newspaper of general circulation in the county in which the whole, or any part of any lot, block, or tract of land to be sold, or the material upon which is to be sold is situated, and by causing)) as described in RCW 79.01.188 at least four weeks prior to the sale date, and post a copy of ((said)) the notice ((to be posted)) in a conspicuous place in the department's Olympia office ((and)), the region headquarters administering such sale, and in the office of the county auditor of such county((, which)).  The notice shall specify the place, date, and time of sale, the appraised value thereof, and describe with particularity each parcel of land to be sold, or from which valuable materials are to be sold((, and)).  In the case of valuable materials sales, the estimated volume ((thereof,)) will be identified and ((specify that)) the terms of sale will be ((posted)) available in the region headquarters and the department's Olympia office.

    ((However,)) The advertisement is for informational purposes only, and under no circumstances does the information in the notice of sale constitute a warranty that the purchaser will receive the stated values, volumes, or acreage.  All purchasers are expected to make their own measurements, evaluations, and appraisals.

A direct sale of valuable materials may be sold to the applicant for cash at full appraised value without notice or advertising.  The board of natural resources shall, by resolution, establish the value amount of a direct sale not to exceed twenty thousand dollars in appraised sale value, and establish procedures to ((assure)) ensure that competitive market prices and accountability will be guaranteed.

    Sec. 7.  RCW 79.01.188 and 1982 1st ex.s. c 21 s 157 are each amended to read as follows:

    The commissioner of public lands shall cause to be printed a list of all public lands, or valuable materials thereon, and the appraised value thereof, that are to be sold ((in the several counties of the state, said lists)).  This list should be published in a pamphlet form to be issued at least four weeks prior to the date of any sale of the lands or valuable materials ((enumerated)) thereon((, such lands and materials to be listed under the name of the county wherein located, in alphabetical order giving the appraised values, the character of the same, and such other information as may be of interest to prospective buyers.  Said commissioner of public lands shall cause to be distributed to the auditor of each county in the state a sufficient number of such lists to supply the demands made upon them respectively as reported by such auditors.  And said county auditors shall keep the list so furnished in a conspicuous place or receptacle on the counter of the public office of their respective departments, and, when requested so to do, shall mail copies of such lists to residents of their counties)).  The list should be organized by county and by alphabetical order, and provide sale information to prospective buyers.  The commissioner of public lands shall retain for free distribution in his or her office and the ((district)) region offices sufficient copies of ((said lists)) the pamphlet, to be kept in a conspicuous place ((or receptacle on the counter of the general office of the commissioner of public lands, and the districts)), and, when requested so to do, shall mail copies of ((said lists)) the pamphlet as issued to any requesting applicant ((therefor)).  ((Proof of publication of the notice of sale shall be made by affidavit of the publisher, or person in charge, of the newspaper publishing the same and proof of posting the notice of sale and the receipt of the lists shall be made by certificate of the county auditor which shall forthwith be sent to and filed with the commissioner of public lands.))  The commissioner of public lands may seek additional means of publishing the information in the pamphlet, such as on the internet, to increase the number of prospective buyers.

    Sec. 8.  RCW 79.01.204 and 1982 c 27 s 2 are each amended to read as follows:

    Sales by public auction under this chapter shall be conducted under the direction of the department of natural resources((, by)) or its authorized representative ((or by the county auditor of the county in which the sale is held)).  The department or department's representative ((and the county auditor)) are hereinafter referred to as auctioneers.  On or before the time specified in the notice of sale each bidder shall deposit with the auctioneer, in cash or by certified check, cashier's check, ((or postal)) money order payable to the order of the department of natural resources, or by bid guarantee in the form of bid bond acceptable to the department, an amount equal to the deposit specified in the notice of sale.  The deposit shall include a specified amount of the appraised price for the land or valuable materials offered for sale, together with any fee required by law for the issuance of contracts, deeds, or bills of sale.  Said deposit may, when prescribed in notice of sale, be considered an opening bid of an amount not less than the minimum appraised price established in the notice of sale.  The successful bidder's deposit will be retained by the auctioneer and the difference, if any, between the deposit and the total amount due shall on the day of the sale be paid in cash, certified check, cashier's check, bank draft, ((postal)) or money order, ((or by personal check)) made payable to the department.  If a bid bond is used, the share of the total deposit due guaranteed by the bid bond shall, within ten days of the day of sale, be paid in cash, certified check, cashier's check, ((or postal)) money order, or other acceptable payment method payable to the department.  Other deposits, if any, shall be returned to the respective bidders at the conclusion of each sale.  The auctioneer shall deliver to the purchaser a memorandum of his or her purchase containing a description of the land or materials purchased, the price bid, and the terms of the sale.  The auctioneer shall at once send to the department the cash, certified check, cashier's check, bank draft, ((postal)) money order, ((or)) bid guarantee, or other acceptable payment method received from the purchaser, and a copy of the memorandum delivered to the purchaser, together with such additional report of his or her proceedings with reference to such sales as may be required by the department.

    Sec. 9.  RCW 79.01.232 and 1927 c 255 s 58 are each amended to read as follows:

    When ((timber, fallen timber, stone, gravel, or other)) valuable materials((, shall have been)) are sold separate from the land and the purchase price is paid in full, the commissioner of public lands shall cause a bill of sale, signed by the commissioner and attested by the seal of his or her office, setting forth the time within which such material shall be removed, to be issued to the purchaser and to be recorded in the office of the commissioner of public lands, upon the payment of the fee provided for in this chapter.

NEW SECTION. Sec. 10.  A new section is added to chapter 79.01 RCW to read as follows:

    For the purposes of this title, "appraisal" means an estimate of the market value of land or valuable materials.  The estimate must reflect the value based on market conditions at the time of the sale or transfer offering.  The appraisal must reflect the department of natural resources' best effort to establish a reasonable market value for the purpose of setting a minimum bid at auction or transfer.  A purchaser of state lands or valuable materials may not rely upon the appraisal prepared by the department of natural resources for purposes of deciding whether to make a purchase from the department.  All purchasers are required to make their own independent appraisals.

    Sec. 11.  RCW 79.01.240 and 1982 1st ex.s. c 21 s 164 are each amended to read as follows:

    Any sale, transfer, or lease of state lands ((made by mistake, or not in accordance with law, or obtained)) in which the purchaser, transfer recipient, or lessee obtains the sale or lease by fraud or misrepresentation((, shall be)) is void, and the contract of purchase((,)) or lease((, issued thereon,)) shall be of no effect((, and the holder of such contract, or lease, shall be required to surrender the same to the department of natural resources, which, except in the case of fraud on the part of the purchaser, or lessee, shall cause the money paid on account of such surrendered contract, or lease, to be refunded to the holder thereof, provided the same has not been paid into the state treasury)).  In the event of such a fraud or misrepresentation, the contract, transferred property, or lease must be surrendered to the department of natural resources, but the purchaser, transfer recipient, or lessee may not be refunded any money paid on account of the surrendered contract, transfer, or lease.  In the event that a mistake is discovered in the sale or lease of state lands, or in the sale of valuable materials on state lands, the department may take action to correct the mistake in accordance with RCW 79.01.740 if maintaining the corrected contract, transfer, or lease is in the best interests of the affected trust or trusts.

    Sec. 12.  RCW 79.01.340 and 1982 1st ex.s. c 21 s 171 are each amended to read as follows:

    Any county or city or the United States of America or state agency desiring to locate, establish, and construct a road or street over and across any state lands of the state of Washington shall by resolution of the board of county commissioners of such county, or city council or other governing body of such city, or proper agency of the United States of America, or state agency, cause to be filed in the office of the department of natural resources a petition for a right of way for such road or street, setting forth the reasons for the establishment thereof, accompanied by a duly attested copy of a plat made by the county or city engineer or proper agency of the United States of America, or state agency, showing the location of the proposed road or street with reference to the legal subdivisions, or lots and blocks of the official plat, or the lands, over and across which such right of way is desired, the amount of land to be taken and the amount of land remaining in each portion of each legal subdivision or lot or block bisected by such proposed road or street.

    Upon the filing of such petition and plat the department of natural resources, if deemed for the best interest of the state to grant the petition, shall cause the land proposed to be taken to be inspected and shall appraise the value of ((any timber)) the land and valuable materials thereon and notify the petitioner of such appraised value.

    If there ((be)) are no ((timber)) valuable materials on the proposed right of way, or upon the payment of the appraised value of ((any timber)) the land and valuable materials thereon, to the department of natural resources in cash, or by certified check drawn upon any bank in this state, or ((postal)) money order, except for all rights of way granted to the department of natural resources on which the ((timber)) valuable materials, if any, shall be sold at public auction or by sealed bid, the department may approve the plat filed with the petition and file and enter the same in the records of his or her office, and such approval and record shall constitute a grant of such right of way from the state.

    Sec. 13.  RCW 79.01.392 and 1961 c 73 s 8 are each amended to read as follows:

    Upon the filing of the plat and field notes, as provided in RCW 79.01.388, the land applied for and the ((standing timber and/or reproduction)) valuable materials on the right of way applied for, and the marked danger trees to be felled off the right of way, if any, and the improvements included in the right of way applied for, if any, shall be appraised as in the case of an application to purchase state lands.  Upon full payment of the appraised value of the land applied for, or upon payment of an annual rental when the department of natural resources deems a rental to be in the best interests of the state, and upon full payment of the appraised value of the ((standing timber, reproduction,)) valuable materials and improvements, if any, the commissioner of public lands shall issue to the applicant a certificate of the grant of such right of way stating the terms and conditions thereof and shall enter the same in the abstracts and records in his or her office, and thereafter any sale or lease of the lands affected by such right of way shall be subject to the easement of such right of way.  Should the corporation, company, association, individual, state agency, political subdivision of the state, or the United States of America, securing such right of way ever abandon the use of the same for a period of sixty months or longer for the purposes for which it was granted, the right of way shall revert to the state, or the state's grantee.

    Sec. 14.  RCW 79.01.795 and 1987 c 126 s 2 are each amended to read as follows:

    When the department finds ((timber)) valuable materials on state land that ((is)) are damaged by fire, wind, flood, or from any other cause, it shall determine if the ((sale)) salvage of the damaged ((timber)) valuable materials is in the best interest of the trust for which the land is held.  If ((selling)) salvaging the ((timber)) valuable materials is in the best interest of the trust, the department shall proceed to offer the ((timber)) valuable materials for sale ((within a period not to exceed seven months from the date of first identifying the damaged timber)).  The valuable materials, when offered for sale, must be sold in the most expeditious and efficient manner as determined by the department.  In determining if the sale is in the best interest of the trust the department shall consider the net value of the ((timber)) valuable materials and relevant elements of the physical and social environment.  ((If selling the timber is not in the best interest of the trust, the department shall not offer it for sale until such time as in the department's determination it is in the trust's best interest.

    If elements of the physical or social environment extend the time required to prepare the timber for sale beyond seven months from the date of first identifying the damaged timber, the department shall prepare the timber for sale at the earliest time practicable.))

    Sec. 15.  RCW 79.64.030 and 1999 c 279 s 1 are each amended to read as follows:

    Funds in the account ((derived)) from the ((gross proceeds of)) moneys received from leases, sales, contracts, licenses, permits, easements, and rights of way issued by the department and affecting school lands, university lands, scientific school lands, normal school lands, capitol building lands, or institutional lands shall be pooled and expended by the department solely for the purpose of defraying the costs and expenses necessarily incurred in managing and administering all of the trust lands enumerated in this section.  Such funds may be used for similar costs and expenses in managing and administering other lands managed by the department provided that such expenditures that have been or may be made on such other lands shall be repaid to the resource management cost account together with interest at a rate determined by the board of natural resources.

    Costs and expenses necessarily incurred in managing and administering agricultural college lands shall not be deducted from proceeds ((derived)) received from the sale of such lands or from the sale of resources that are part of the lands.  Costs and expenses incurred in managing and administering agricultural college trust lands shall be funded by appropriation under RCW 79.64.090.

    An accounting shall be made annually of the accrued expenditures from the pooled trust funds in the account.  In the event the accounting determines that expenditures have been made from moneys ((derived)) received from trust lands for the benefit of other lands, such expenditure shall be considered a debt and an encumbrance against the property benefitted, including property held under chapter 76.12 RCW.  The results of the accounting shall be reported to the legislature at the next regular session.  The state treasurer is authorized, upon request of the department, to transfer funds between the forest development account and the resource management cost account solely for purpose of repaying loans pursuant to this section.

    Sec. 16.  RCW 79.64.040 and 1999 c 279 s 2 are each amended to read as follows:

    The board shall determine the amount deemed necessary in order to achieve the purposes of this chapter and shall provide by rule for the deduction of this amount from the ((gross proceeds of)) moneys received from all leases, sales, contracts, licenses, permits, easements, and rights of way issued by the department and affecting public lands, provided that no deduction shall be made from the proceeds from agricultural college lands.  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, which have not been subjected to deduction under this section are not subject to deduction under this section.  The deductions authorized under this section shall in no event exceed twenty-five percent of the ((total sum)) moneys received by the department in connection with any one transaction pertaining to public lands other than second class tide and shore lands and the beds of navigable waters, and fifty percent of the ((total gross proceeds)) moneys received by the department pertaining to second class tide and shore lands and the beds of navigable waters.

    Sec. 17.  RCW 79.64.050 and 1961 c 178 s 5 are each amended to read as follows:

    All deductions from ((gross proceeds)) moneys received made in accordance with RCW 79.64.040 shall be paid into the account and the balance shall be paid into the state treasury to the credit of the fund otherwise entitled to the proceeds.

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