Overview

The OCSRI Plan is a comprehensive effort to conserve and restore coastal populations of salmon, steelhead, and trout to levels that are considered healthy and capable of supporting fisheries. Many of the actions proposed to accomplish this goal have already been implemented and will be maintained under existing state and federal agency budgets. Many actions initiated or proposed to restore the productive capability of habitats that support salmon production represent voluntary contributions by private landowners. Many other elements of the OCSRI will require new funding sources.

Oregon clearly understands the importance of adequate funding to implement the OCSRI. The purpose of this section is to describe the opportunities that are being pursued to secure the needed funding.

STATE FUNDING

Introduction

The proposed state funding package is contained in the Governor's 1997-99 Recommended Budget. The Oregon Legislative Assembly is currently considering the Governor's Recommended Budget. There are three principle elements of the budget related to implementation of the OCSRI: the Natural Resource Investment Budget, natural resource agency current service level budgets, and agency policy option packages.

Governor's Natural Resource Investment Budget

The Governor's recommended Natural Resource Investment Budget totals approximately $60 million. This budget element would invest approximately $30 million in the Oregon Coastal Salmon Restoration Initiative and the Healthy Streams Partnership, a critical element of the OCSRI. As proposed, the Investment Budget is funded through a new excise tax on returnable beverage containers. The proposed surcharge will generate between $60 million to $100 million in revenue per biennia when applied to an estimated 1.1 billion containers returned under the existing bottle bill.

The Natural Resource Investment Budget provides $20 million in grant funding to support watershed council coordinators and other local organizations, including Soil and Water Conservation Districts; monitoring activities; and grants to landowners. The existing Governor's Watershed Enhancement Board will administer the grant program. The budget also provides approximately $10 million to add technical staff resources in the Department of Agriculture (19 positions), Department of Environmental Quality (19 positions), Department of Fish and Wildlife (14 positions), Department of Forestry (6 positions), Water Resources Department (4 positions), and Department of Land Conservation and Development (1 position). The investment budget funding proposal for each state agency is described below.

Department of Agriculture

Water Quality: (Approximately $3.1 million Other Funds, 16 positions, 16.38 FTE) Allows the department to develop and carry out management plans to meet state water quality standards in basins where agricultural nonpoint source pollution is a significant factor. Funding provides the department with the capability to meet mandated responsibilities and increased workload associated with expanding nonpoint water quality programs. The positions include six regional coordinators and seven technical specialists responsible for completion of management plans for water quality limited basins, a program coordinator, a fiscal support specialist, and an office specialist. In addition, $1.1 million is included to support local organizations working on nonpoint source issues.

Confined Animal Feeding Operations (CAFO): Approximately $380,500 Other Funds, 3 positions, 3 FTE) Provides resources for the department to work with CAFOs to improve the level of compliance with water quality regulations. The department will monitor compliance of all permitted CAFOs through a periodic inspection system and provide educational outreach and technical assistance to landowners. Two of the positions will be regional enforcement inspectors and one will provide courtesy inspections.

Department of Environmental Quality (Approximately $2.5 million Other Funds, 19 positions, 19 FTE) Provides the department with staff necessary to complete water quality plans in subbasins. The positions will be located in field offices and the laboratory and would monitor water quality, develop total maximum daily loads, allocate pollution loads, and modify permits to stabilize and restore stream health, and eventually remove streams from the 303(d) list. The proposed funding would also be used to purchase water quality monitoring equipment, supplies and services for the laboratory. The positions will include 10 positions focused on data collection, analysis and evaluation: 4 total maximum daily load (TMDL) specialists, 2 water quality monitoring specialists, 2 watershed monitoring specialists, 1 TMDL modeler, and one state water quality specialist. Nine positions will focus on TMDL development and technical assistance: 4 nonpoint source specialists, 3 basin TMDL specialists, and 2 complex TMDL permit specialists.

Department of Fish and Wildlife ($2.2 million Other Funds, 14 positions, 14 FTE) Adds 3 positions to undertake index stream monitoring to estimate wild salmon smolt production from selected, previously sampled, streams that can provide historical comparison, 3 positions to monitor core habitat to provide protection, adaptive management, habitat enhancement, and population re-establishment; 3 positions to provide technical support to private interests, watershed councils, and others on habitat protection and restoration in the north, central and south coast areas; 2 positions to coordinate and implement the OCSRI monitoring plan; 1 position to coordinate implemention of the OCSRI; and two positions to improve education and outreach efforts to local communities.

Department of Forestry (Approximately $1.1 million, 6 positions, 5.75 FTE) Adds resources for three projects: fish presence surveys, technical assistance for landowners (5 positions) and integrated forest resource assessments (1 position). Fish presence surveys will identify the upper limits of fish distribution to classify streams as required by the Oregon Forest Practices Program water protection rules. Technical assistance positions will provide more resources to ensure that water protection rules are adhered to during a timber harvest. The integrated forest resource assessment will allow the department to incorporate an integrated look at multiple forest resources, and determine the effect of forest practices and policy decisions.

Governor's Watershed Enhancement Board (GWEB) (Approximately $482,200 Other Funds, 4 positions, 4 FTE) Funding would restore GWEB staff to its 1995-97 level and add one position. Restoration is necessary to continue the current grant program and expand it as envisioned in the investment budget. The intent is to use GWEB as the state's natural resource granting body, with technical groups to advise on particular grant issues. Two of the three positions being restored are field staff positions that work with local watershed councils; the other position provides fiscal grant management for the program.

Department of Land Conservation and Development (Approximately $114,000, 1 position, 1 FTE) Adds one position to coordinate and provide technical assistance to agencies and coastal cities and counties that have resource management responsibilities for implementation of the Coastal Nonpoint Source Pollution Control Program.

Current Service Level Budgets and Policy Option Packages

The Governor's 1997-99 Recommended Budget supports numerous programs in state natural resource agencies that contribute to the OCSRI at current service levels. These programs are reflected in the agencies' proposed measures. To build on this existing base of agency resources, the budget also includes a number of "policy options packages" that represent new funding above current service levels. The packages directly related to the OCSRI are described below.

Department of Fish and Wildlife ($1.1 million General Funds, 10 positions, 10 FTE) Funds habitat biologists who would offer technical support on fishery issues to local communities and watershed councils and other state and federal agencies making permit decisions that affect fish.

Department of Fish and Wildlife ($200,000 General Funds) Provides funds to support Oregon's share of the multi-state For the Sake of the Salmon effort. Other participating states include Washington, Idaho and California.

Department of Forestry ($250,000 General Fund, $250,000 Other Funds, 5 positions, 4.25 FTE) Adds staff to provide small forest landowners with assistance to help them voluntarily invest in practices that will accelerate the improvement of clean water in streams and restore salmon habitat while managing their forest lands.

Division of State Lands (Approximately $194,000 Other Funds, 2 positions, 2 FTE) Adds positions to help agency meet statutory mandate of prompt permit application review and enforcement actions for the removal or fill of more than 50 cubic yards of material in all waters of the state.

Water Resources Department (Approximately $1.9 million General Funds, 11 positions, 11 FTE) Adds eight field staff to support water users, watershed councils and the public. Adds funds for one limited duration position and contract funds for ground water studies of the Klamath, Rogue, and South Coast basins. Adds two information services staff positions to improve central data management.

Two other policy option packages would restore existing positions related to OCSRI implementation in the Department of Environmental Quality and State Police.

Department of Environmental Quality (Approximately $2 million Other Funds, 14 positions, 14 FTE) Restores 14 existing positions that provide permitting services to point sources that discharge polluted wastewater.

State Police (Approximately $2.1 million General Funds, 13 positions, 13 FTE) Restores staffing for 13 Fish and Wildlife Division positions. The positions are responsible for enforcement of fish and wildlife rules and regulations, environmental crime enforcement, fill/removal regulations, water quantity and quality and other natural resource rules and regulations. The positions will be directed toward salmon restoration and protection and healthy streams.

FEDERAL FUNDING

The federal contribution in the OCSRI is important primarily in terms of what federal agencies offer in their management of public lands, but also in their ability to bring intergovernmental and interagency assistance to local communities.

The Federal Agency Workplan section (Chapter 17D) of this plan provides details of programs that have been authorized by Congress over the years as well as the technical assistance, activities and legal requirements that agencies are able to commit to with current budgets (Phase 1). They describe memoranda of understandings that facilitate coordinated efforts among agencies and provide greater efficiencies with the available dollars. They also detail what they would be able to provide under their congressional mandates and authorities given additional funds (Phase 2).

It is important to note that some of the authorized programs described currently provide the authority for programmatic activity, but are not funded or are not currently available for much funding in the range of the coastal coho under the constraints of federal regulations. Similarly, while the federal agencies' Phase 2 efforts are important to salmon recovery, they will need to be Congressionally funded in an era of federal budget reductions, and an unfavorable shift in congressional seniority away from Oregon. The Governor's Office, members of the Oregon Legislative Assembly, along with numerous other interest groups and Oregonians, will work with the Oregon Congressional delegation, other members of Congress, and the Administration to try to obtain this needed federal funding for efforts to restore coho salmon runs.

Introduction

The OCSRI Plan represents a comprehensive effort to conserve and restore coastal populations of salmon, steelhead, and trout to levels that are considered healthy and capable of supporting fisheries. Many of the actions proposed to accomplish this goal have already been implemented and will be maintained under existing state and federal agency budgets. Funding some activities has already required reprogramming of agency budgets. Many actions initiated or proposed to restore the productive capacity of habitats that support salmon production represent voluntary contributions by private landowners. Many other elements of the OCSRI Plan will require new funding sources.

The purpose of this section is to describe a number of opportunities that will be pursued to provide needed funding for implementation of Oregon's conservation plan. Many aspects of future funding are not clear at this time. Additional information will be provided to NMFS, cooperating agencies, and stakeholders as soon as it is available. The following information is provided in this section:

• Needs and options for state funding
• Needs and options for federal funding
• Proposals for economic incentives

Preliminary Recommendations for OCSRI Incentives Programs

Introduction

These proposals are based upon an extensive search of current reports and other materials regarding incentives for biological diversity, environmental restoration, and endangered species protection, in addition to consultations with individuals and organizations working on similar projects across the United States. The proposals in this report are provided to the OCSRI as recommendations for action by the Governor, the Legislature, and other interested parties. A timetable for making decisions regarding these possible incentive programs has not yet been established. At the present time, For The Sake Of Salmon (FSOS) is also working on a parallel track to prepare a series of recommendations for incentive programs that will be endorsed by the Executive Committee for local, state, regional and federal action in late 1996.

Proposal 1 - Design and Implement a Watershed Stewardship Award Program The simplest and least expensive incentive for private landowners is official recognition and praise for their efforts to do the right thing in management of their land for salmon protection and restoration. Giving praise plentifully and strategically is a powerful tool. People everywhere want to be appreciated.

Recommendations for Proposal 1

1. The Governor's office should immediately design and implement an awards program recognizing individual landowners for outstanding projects to restore private lands for salmon restoration. Awards would be made on an occasional basis year round with the Governor personally presenting appropriate plaques and recognition in public ceremonies at county fairs, Chamber of Commerce luncheons. and other events or meetings. The awards should be dated and specific, relating the award to projects done in a certain time frame.

2. An additional "Stewardship Master" award could be given annually to an individual or family who has demonstrated an outstanding long-term commitment to land management for biodiversity. The award could be named for a state or community leader, and possibly be called "Governor's Steward of the Land Award" or some other "in honor of" designation.

3. Nominations could come from various sources including individuals, organizations, and state agencies. To give the awards some weight, an advisory panel could be appointed to evaluate and recommend nominations to the Governor two or three times a year.

4. A separate category of equivalent awards should be implemented to recognize business and nonprofit organizational leadership in these areas.

5. All departments represented in the OCSRI should also implement similar award programs within their agencies.

Proposal 2 - Significantly Modify and Expand the Riparian Tax Incentive Program A consensus exists among many constituencies that the existing riparian tax credit incentive program, due to end in January 1997, is a good idea but is (as currently funded and implemented) of marginal practical value for most eligible landowners. For current use of agricultural lands, the property tax credit amounts to an insignificant benefit relative to the paperwork involved.

Recommendations for Proposal 2

1. In addition to its existing applicability, make the Riparian Tax Incentive Program available within urban growth boundaries. Urban streams have, and can provide, significant salmon habitat; many still have some useful habitat in place. Examples, such as Johnson Creek in the Portland area and many others around the state, would show major benefits with a significantly expanded program. Keep the credit applicable to property tax within the urban growth boundaries.

2. For lands outside the urban growth boundary, make the tax credit applicable to the income tax. This would likely carry a heavier incentive for many exclusive farm and forest landowners, and also would be much easier to quantify and measure.

3. Significantly expand the number of field habitat restoration biologists within ODFW to support landowners in restoration design and implementation.

Proposal 3 - Provide a Bonus to Local Governments That Meet or Exceed Salmon Restoration Performance Standards in Road Operation and Maintenance Local transportation departments have reduced budgets, so any incentive that would generate additional funds for their departments would attract great efforts.

Recommendations for Proposal 3

1. Provide a 10 percent bonus to local transportation block grants for local governments that meet design and operation standards for salmon passage and habitat restoration projects on local highways.

Proposal 4 - Federal Estate Tax Reform Federal estate tax requirements are a major obstacle for private landowners who have been sensitive of their lands' environmental value and would like to pass their land to their heirs without destroying that value. The imposition of federal estate taxes, however, often forces large parcels of environmentally valuable land to be divided into smaller, less environmentally valuable parcels. Some of the best remaining habitat for endangered species is put at risk in this manner.

Federal law imposes a tax on the amount of a decedent's estate in excess of $600,000. The tax begins at a rate of 37 percent and climbs to 55 percent for estates in excess of $3 million. For estates in which undeveloped land represents a significant portion of the estate's total value, the need to pay the federal tax creates powerful pressure to develop or sell part or all of the land, or to liquidate the timber or other resources of the land.

Because land is appraised by the Internal Revenue Service according to its "highest and best use" and such use is usually deemed to be its fully built-out value, the effect of the tax is to make retention of undeveloped land in forest or other undeveloped condition difficult at best. For farmers, ranchers, forest landowners, and others who are "land rich and cash poor," the federal estate tax is a widely perceived threat to the ability to pass on the family's property to the next generation, or to allow that generation to permanently preserve its natural resource values.

Efforts to reform estate tax law pertinent to protecting endangered species and managing for biodiversity should have two goals: (1) keep large parcels of environmentally sensitive land intact, and (2) ensure this land is managed for biological diversity and species protection. To address this problem, the Governor should support several provisions of estate tax reform currently seeing a fair amount of support in Congress and with a good prognosis for action in the next session.

Recommendations for Proposal 4

1. To bolster donation incentives, the estate tax law should be changed to explicitly allow the estate or heirs to do what the decedent could have done before death, namely allow the estate to make a tax-deductible gift of land or an interest in land to a qualified organization. This change would not only allow the estate to reduce the value of the taxable estate and thereby decrease the amount of taxes payable by the estate, but would also ensure that the land ended up in conservation ownership or with conservation restrictions.

2. A second, more attractive proposal, would be to go one step further by providing that any gifts of land, or interest therein, with endangered species habitat from an estate to a qualified conservation organization would give the estate a tax credit rather than a simple deduction. Not only would this provision reduce the amount of taxable estate, it would also provide a credit against any tax owed.

3. Landowners could also be given the opportunity to reduce their estate tax burden in return for voluntarily entering into revocable agreements to mange their lands in ways that benefit endangered species. To qualify, the owner or executor would need to enter into a written agreement with the Secretary of Interior (or a state fish and game agency if a suitable agreement existed between the Secretary and the state agency) to manage an identifiable parcel of land in a way that provided significant benefits to endangered species. Such management could include measures not otherwise required by law, or an agreement to refrain from activities not prohibited by law.

4. Landowners already practicing beneficial habitat management may need only agree to continue existing uses and to forgo other legally permissible uses. The heirs would, however, be liable for any tax originally due with respect to the property aside from the agreement if the heirs subsequently ceased to honor the conservation agreement, or if they disposed of the property without securing the agreement of the new owners to continue the conservation agreement and assume the tax liability in the event of a breach. The amount of any tax then due should be adjusted to reflect any intervening changes in the land's value not relative to improvements thereon. In this manner, heirs can (for as long as they wish) effectively defer estate tax due on a parcel of land at the time of death of the person from whom the property was inherited. By maintaining the conservation agreement indefinitely, they escape the estate tax on property altogether.

Proposal 5 - Incentives for Decommissioning Roads and Conducting Concurrent Habitat Restoration on State Lands The construction and use of highways and forest roads carries the potential to degrade and pollute natural systems, including nearby streams. While the Northwest's network of highways (which covered 220,000 miles in 1994) has expanded relatively little since 1960, forest roads have proliferated. In Oregon alone the number of forest roads has more than tripled since 1960; and in both Idaho and Washington, they have more than doubled.

According to the Department of Forestry, state forest lands will be spending over $5 million during the next two years for restoration of roads, replacement of culverts, and repair of other stream crossing structures damaged by the February 1996 storm and floods. State forest lands are also proposing to spend an additional $15 million over the next six years to improve roads including stream crossing structures. This effort will upgrade approximately 130 miles of road in each biennium. The majority of these roads are in the Tillamook Bay watershed.

Recommendations for Proposal 5

1. Rather than limit mitigation of damage on salmon (caused by roads), to improved passage and improvements, Oregon (given its much higher density of forest roads than the rest of the region) should set an example to the federal and private land mangers by providing incentives for decommissioning roads on state lands and restoring the habitat in the process. One possible incentive could be an increase for a specific period of time in the operating budget of a state forest per every 10 miles of decommissioned roads with concurrent habitat restoration.

2. The OCSRI should also consider designing federal incentives for decommissioning of national forest roads.

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