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From paying the Common School Fund to developing a management plan, keeping the Elliott in public hands is an expensive proposition.

SALEM — Keeping the Elliott State Forest public isn't cheap.

When Oregon's State Land Board voted to stop the sale of a 82,500-acre swath of the forest near the Southern Oregon coast to a private timber company in May, it gave up the $220.8 million that Lone Rock Resources and the Cow Creek Band of Umpqua Tribe of Indians intended to pay.

The state spent more than $3.5 million on the proposed sale, a prolonged bureaucratic process requiring multiple steps, public meetings and many hours of employee time.

Now, the Department of State Lands is requesting an additional $5.7 million to pay for continued management of the forest and the development of a long-term plan to protect the forest's habitat for endangered species.

That money would come from the Common School Fund, according to a June 7 letter from DSL Director Jim Paul to Senate President Peter Courtney, D-Salem.

The constitutional requirement that the forest generate money for that fund is one source of the complex tension over the forest.

Historically, timber sales have provided the money, which is invested and disbursed in increments to help pay for public K-12 education.

Increased limitations on logging in the forest due to regulations protecting endangered species prompted the land board — comprised of the governor, treasurer and secretary of state — to consider selling it and giving the proceeds to the fund.

The Department of State Lands doesn't receive funding from the state's General Fund. The agency gets most of its money from a category referred to as "other funds," which includes fees and disbursements from the Common School Fund.

The fund's interest earnings have paid for forest management costs, according to a spokeswoman for the department.

Although the department has used those funds to pay the Oregon Department of Forestry to manage the land for decades, it recently decided to outsource management to save money. Titan-Kelly, LLC, has been selected for the task for the coming year, and will manage the forest starting July 1.

Over the next two years, the Department of State Lands estimates it will cost about $1.6 million to have a private company do basic management work on the forest. In mid-2016, ODF estimated it would cost $1.7 million per year to do custodial management of the forest, according to the Department of State Lands — approximately twice the cost of the private contractor.

Department of State Lands officials say when they developed their budget a year ago they thought that the land board would approve the forest's sale and it would close in or around December of 2017. That short period boosted the argument for outsourcing management.

Because the board has decided to keep the forest in public hands, the state is working on a Habitat Conservation Plan to protect the forest. The forestry department estimates it needs 13 people — ranging from a silviculturist to a technical writer — to develop the plan. DSL is also requesting two employees — a policy analyst and a part-time administrative specialist.

Despite the cost of developing the plan, environmental groups have argued selling the forest would have long-term environmental costs.

Josh Laughlin, executive director of Cascadia Wildlands, one of the leading opponents of privatizing the Elliott, believes the state's spending on the Habitat Conservation Plan is worthwhile.

"This initial investment is really a small price to pay for the incredible benefits that the public forest will now forever provide Oregonians," Laughlin said. "And you can't really put a price tag on a lifetime of clean water, salmon and wildlife habitat and recreation."

There's still the problem of how the state will "buy" the forest, valued at $220 million, and pay the Common School Fund.

The department is developing a proposal to use up to $100 million in state bond capacity to buy certain sensitive areas of the forest, a move that requires legislative approval. It's exploring selling the remainder to Oregon State University or tribal governments. It's also possible the state could make a deal with the federal government to exchange the Elliott for less sensitive federal forestland that could be harvested to benefit the fund.

Alex Pulaski, a spokesman for the Oregon School Boards Association, said Monday the association hadn't finished analyzing the various proposals and sources of funding being considered. The association warned the land board in April that its member districts may sue should the final proposal fail to meet the state's obligation to the Common School Fund.

"As we have maintained throughout this process, we are concerned about any significant management expenses that drain money from the Common School Fund when at the same time logging in the Elliott has been limited," Pulaski said. "The net effect in recent years has been for the Elliott to take money from the fund rather than to contribute to it. We want to ensure that the Common School Fund keeps growing so that Oregon can direct resources to the classroom where they belong."

Finally, it's unclear how much the state may end up spending on legal costs. Officials face two possible court challenges: the one from the schools, and the other from Lone Rock Resources, the Roseburg timber company that was poised to buy the forest.

Lone Rock seeks about $3.3 million, part of it to make up for the money it spent complying with the state's protocol for selling the forest, and the rest corresponding to what it alleges is the $2 million increase in value of the property between the appraisal and May 1.

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