Trust Lands Performance Initiative

Fog in a forest creates rays of light through the trees.

The Washington Department of Natural Resources (DNR) manages state trust lands for the people of Washington. Non-tax revenue generated from these lands funds essential public services and infrastructure for counties, schools, universities, and other trust beneficiaries. These lands also provide scenic views, recreation opportunities, rural jobs, and a host of ecological values, including wildlife habitat, clean air and water, and carbon sequestration. 

Over the past 25 years, total net revenue from state trust lands has declined in real dollars, reducing DNR’s ability to deliver steady, reliable revenue to trust beneficiaries. To address this challenge, DNR launched the Trust Lands Performance Initiative (TLPI) in 2017.

DNR’s vision for this project is to provide reliable and increased revenue for trust beneficiaries while sustaining and/or enhancing natural resource lands and their associated ecosystem services. Its goal is to transform state trust land management to meet the needs of current and future generations. 

The TLPI project began with the Trust Lands Performance Assessment (TLPA), which included a valuation of state trust lands and a review of DNR’s management practices. The project continues today with a series of projects guided by DNR’s 2023 report to the Legislature. Review the following tabs to learn more.

Trust Lands Performance Assessment
A lenticular cloud over Mount Rainier with a working forest in the foreground; photo taken from Elbe State Forest

The Trust Lands Performance Assessment (TLPA) was a two-year effort completed in partnership with the Legislature (through ESSB 6095, Section 7105), interested parties, and two private contractors: Deloitte Transactions and Business Analytics (Deloitte) and Earth Economics.

Legislative Report - DNR

In 2021, DNR developed a legislative report that summarized the findings, challenges, and opportunities highlighted by Deloitte and Earth Economics. The report also includes DNR’s recommendations for the future of state trust lands management. 

Trust Land Portfolio Assessment – Deloitte 

Deloitte’s work involved the following tasks:

  • Estimate the value of state trust lands,
  • Report on the return-on-investment provided by income from state trust lands, and
  • Provide recommendations on ways to improve or enhance operations and returns.

Complete 2021 TLPA 

Separate chapters:

Non-Market Environmental Benefits and Values – Earth Economics

Earth Economics completed a valuation of the ecosystem services provided by state trust lands, including carbon storage and recreation.

1996 Trust Lands Performance Assessment

DNR contracted with Deloitte and Touche, LLP to conduct a similar assessment in 1996.

Improve Business Systems

Well-designed business systems will help DNR stay on track and make necessary course corrections to better meet the needs of trust beneficiaries. These improvements will also increase the transparency of DNR’s work. Under this focus area, DNR will:

  •  Improve the tracking and reporting of gross and net revenue, costs, profits, and losses. 
  •  Modernize business systems.

Projects

Completed

  • Develop a new chart of accounts: A chart of accounts is used to track expenditures and revenues by source, product, or activity. DNR created a chart of accounts that tracks actual expenditures by asset class, allowing DNR to populate financial reports with ease. The chart of accounts is an important decision-making tool.
  • Improve financial statements: Each quarter, DNR prepares profit-and-loss reports to show how each asset class is performing. DNR tracks trust management fund balances in detail and compares quarterly revenue and expenditure projections to actual activity. This work will allow DNR to make budget decisions beyond the current biennium.

Current/Ongoing

  • Modernize the lease management system: DNR is developing a modern system to manage contracts, leases, and permits for the commercial use of state trust lands. Called the Land Agreement Management System (LAMS), this system replaces NaturE, which was implemented in 2006 and has reached the end of technical support. The LAMS system is modern and user-friendly, allowing DNR to report on specific programs. It will integrate well with other DNR systems and technologies to improve efficiency.  
Increase Amount and Reliability of Revenue
A two-photo collage showing an active timber sale and an agricultural field.

As noted in the Trust Land Performance Assessment, a decline in revenue over the past 25 years has been accompanied by difficulties in delivering steady, reliable revenue to trust beneficiaries. Under this focus area, DNR will:

  • Work to improve financial returns for specific asset classes. For example, explore ways to fund capital improvements to increase the revenue-generating potential of state trust lands.
  • Explore solutions to reduce year-to-year volatility in trust beneficiary revenue, enabling rural communities to better plan for the future.
  • Change how management funding is apportioned between asset classes, which will enable DNR programs to meet critical needs and take advantage of new opportunities.

For more ways to increase revenue, visit the "Optimize the State Trust Lands Portfolio" and "Research and Engage in New Markets" tabs.

Projects

Completed

  • Make timber sales more efficient: In 2026, DNR requested statutory changes to modernize its timber sale process. Examples include advertising the sale of land and valuable materials on its website instead of making hard copies available; holding public auctions in more advantageous locations to attract more bidders; and quickly re-offering sales that do not receive bids. These changes were passed through House Bill (HB) 2348 in the 2026 legislative session.
  • Increase lease length: In 2022, DNR asked the legislature to amend RCW 79.13.060 to extend the maximum term for certain leases on state trust land from 55 to a more “industry standard” 99 years. Longer lease lengths make DNR-managed commercial properties more competitive for prospective lessees. It also reduces the time state trust land properties remain vacant or undeveloped, thereby maximizing revenue for state beneficiaries. This change was passed in the 2022 legislation through HB 1430.

Potential

  • Consider an endowment model approach for more reliable revenue: Under this model, trust revenue would be deposited into an account and invested, rather than distributed directly to beneficiaries or into permanent funds or other accounts. Distributions would be set by policy and consist of earnings, principal, or a combination of both. This fund would also cover DNR’s operating expenses. This approach could reduce year-to-year fluctuations in revenue for trust beneficiaries. DNR may explore this idea in the future.
Research and Engage in New Markets
A forested mountain valley filled with fog at dawn

DNR’s management of the state trust lands portfolio should be responsive to today's context but nimble enough to address the challenges, opportunities, and emerging markets of the future. Goals for this focus area include the following:

  • Identify new and emerging markets that could be a good fit for state trust lands. 
  • Identify capital improvements and other requirements for participating in these markets. 

Projects

Current/Ongoing

  • Geothermal leasing: Some locations on state trust lands have high potential for geothermal energy production, which involves tapping into underground zones of elevated heat. DNR is currently considering proposals for geothermal exploration and feasibility studies, which are handled through short-term land-use licenses. If these mostly non-invasive studies indicate that commercial geothermal energy production is feasible, a licensee must complete all necessary state and local permitting and environmental review. 

Potential

  • Capitalizing on ecosystem services to diversify revenue: Ecosystem services are the benefits that natural systems provide, such as clean water and air, carbon sequestration, and recreation. DNR currently has the authority to lease state lands for ecosystem services but lacks certainty about its authority to sell ecosystem service credits in existing and emerging markets. In the future, DNR will continue to seek clarity about its ability to take advantage of these markets in the same manner as private landowners. These new revenue streams could complement DNR’s current operations and generate more funds for beneficiaries and the management of lands and waters. Read DNR’s 2025 ecosystem services legislative report to learn more about current and potential markets.
  • Deep carbon capture leasing: Some state trust lands may be suitable for deep carbon capture, also called geologic carbon sequestration (GCS), which involves injecting CO2 into the ground for permanent storage in porous rocks. GCS is compatible with other land uses because GCS facilities do not require a large surface footprint. To pursue this opportunity, DNR would first need to identify suitable areas and then lease promising sites for feasibility studies under short-term land-use licenses.
Optimize Land Asset Portfolio
A view of working forest on gently rolling hills, with a few large trees in the foreground

DNR is committed to maintaining working forests and agricultural lands as a core and valuable part of the state trust lands portfolio. These lands are critical to rural communities and the people of Washington. They also provide extensive ecosystem services, including carbon storage and recreational opportunities that are key to the quality of life for Washington residents. 

Under this focus area, DNR will seek ways to optimize the state trust lands portfolio while also safeguarding natural lands and responding to evolving social needs. Specifically, DNR will pursue the following:

  • Enhance existing land transaction tools to improve their effectiveness. DNR transacts land for many reasons, such as to make lands easier to manage, improve trust values, increase income potential, or replace lands transferred into conservation with lands that can generate long-term, sustainable revenue.
  • Identify regulatory adjustments that could make land transactions more efficient. 
  • Work with the Board of Natural Resources to develop policies for managing the asset portfolio and measuring its performance over time.

Projects

Completed

  • Revitalize the Trust Land Transfer (TLT) Program: Through this program, DNR transfers lands of high ecological value to a receiving agency for management as a natural area, park, or similar designation. DNR then purchases replacement land that can earn long-term, sustainable revenue for the affected trust(s) through a legislative appropriation. In 2021 and 2022, DNR worked with two external work groups to make the program more effective and transparent, and to establish it in statute through Substitute House Bill (SHB) 1460. View the final report DNR submitted to the legislature. Visit the TLT webpage for more information on this program.
  • Open the TLT program to State Forestlands: As part of revitalizing the TLT program, DNR worked with the legislature to open the program to all trusts, including State Forestlands, to make it more flexible and effective. This change was included in SHB 1460.
  • Make the Land Bank more effective: Established in 1977, the Land Bank is a mechanism for purchasing and selling state trust lands without diminishing the corpus (body) of the trust. SHB 1460 removed the 1,500-acre limit on lands placed within the Land Bank, making it far more effective. 
  • Clarify the real estate excise tax (REET): In Washington state, sellers must pay the REET when a property is sold. In the 2026 legislative session, DNR asked the legislature to clarify Chapter 82.45 RCW to ensure that all working forest land sold to public entities, such as DNR, are considered “timberland” for the purposes of taxation, if those lands will continue to be managed as working forests. This change should prevent inconsistencies in tax assessments that were making it more expensive for forestland owners to sell to DNR. This change was passed through HB 1983.
  • Change compensation tax regulations: In 2024, DNR asked the legislature to exempt landowners from paying a "compensating tax" when selling land to a government entity that will continue to manage the property as forestland. This change allows DNR to compete in the open market to purchase working forests and prevents the conversion of these parcels to uses other than forestry. This bill was passed in the 2024 legislative session through SHB 1818.
  • Increase flexibility in land transactions: In 2023, DNR proposed changes to RCW 79.11.340 to allow DNR to market lands through a professional real estate service when initially offering a parcel for sale. Previously, parcels could not be marketed through a real estate service unless they first failed to sell at a public auction. This change was passed in 2023 as part of SHB 1460.

Current/Ongoing

  • Set strategic direction for the state trust lands portfolio: The Asset Management Council makes recommendations on land acquisitions and divestitures to meet the following goals: maximize trust beneficiary revenue, make efficient use of DNR’s management funds, support good stewardship of the state’s ecological resources, support biodiversity, and reflect community values. For example, the council may recommend that DNR acquire new lands for a certain asset class or transfer existing state trust lands into a natural area. The council consists of DNR's chief appraiser, executive management staff, and managers from DNR's divisions and regions.