When the Oregon Watershed Enhancement Board spends Measure 66 lottery money to monitor a stream or control invasive weeds, does that count as a 'capital expenditure' for the 65% mandate, or as ordinary operations?

Subject

Catherine Pollino, Director, Audits Division, Secretary of State

Plain-English summary

Oregon voters approved Ballot Measure 66 in 1998. It amended Article XV of the Oregon Constitution to dedicate 7.5% of net State Lottery proceeds to "financing the restoration and protection of wild salmonid populations, watersheds, fish and wildlife habitats and water quality." Article XV, section 4b, added a constitutional requirement that at least 65% of those moneys be used for "capital expenditures."

The Audits Division asked the AG to clarify what "capital expenditures" meant for two common types of spending: monitoring and evaluation activities (tracking how a project was performing), and Department of Agriculture weed control (clearing invasive species from riparian and watershed areas).

The AG concluded both could be capital expenditures, but only when tied to a specific project. The dividing line was whether the spending was part of a discrete, project-based effort to restore, protect, or improve a watershed resource, or instead was ordinary, ongoing operational activity.

For monitoring and evaluation, the test was whether the activity was part of a specific project to restore a wild salmonid population, watershed, fish or wildlife habitat, or water quality; or to protect or conserve such a resource for long-term betterment; or to realize long-term improvement in water quality in a specific area. Those uses counted as capital expenditures. Regular ongoing monitoring of water quality, fish populations, watersheds, or habitats, conducted independent of a specific project, did not. Monitoring conducted after a project was fully established, as routine maintenance, did not count either.

The same logic applied to weed control. Removing invasive weeds as part of a project to restore a watershed or improve fish habitat counted as a capital expenditure. Routine ongoing weed maintenance of an area already functioning properly did not. The AG framed this as a project-vs-maintenance distinction running throughout the Article XV framework: capital expenditures are about building or rebuilding something, not about keeping the lights on.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Why does the 65% capital-expenditure rule matter?
Because Article XV, section 4b, makes it constitutional. Spending Measure 66 money in violation of the 65% rule would expose the state to legal challenge and could threaten the use of those funds. Auditors and grant administrators had to be able to tell which expenditures counted toward the 65% threshold.

Could the Oregon Department of Agriculture's weed control work count as a capital expenditure?
The AG concluded yes, but only if the weed control was part of a specific project to restore a wild salmonid population, watershed, fish or wildlife habitat, or water quality, or to protect or conserve one of those resources for long-term betterment. General weed management as ongoing maintenance did not count.

Why didn't routine monitoring count?
The AG read "capital expenditures" in Article XV, section 4b, as referring to spending on discrete projects rather than open-ended operational activity. Routine monitoring, like a standing program of water-quality sampling that ran independent of any specific restoration project, was operational, not capital. The same monitoring program conducted as part of a defined project to restore a particular watershed was capital, because it was an integrated part of the project.

What about monitoring after a project finished?
The AG concluded that monitoring conducted after a project was fully established, as a maintenance activity, did not qualify as a capital expenditure. The threshold was whether the activity was part of building or rebuilding the resource, not maintaining it after the fact.

Did this opinion bind grant recipients?
The opinion bound state auditors and the Oregon Watershed Enhancement Board in how they classified expenditures for the 65% calculation. Grant recipients had to organize their work and reporting consistent with that classification. The opinion did not directly bind private parties.

What counts as a "specific project"?
The AG did not give a precise definition. The implicit test was whether the activity had a defined scope, geographic footprint, and goal of restoring or improving a particular resource. Open-ended ongoing programs did not. Discrete, time-bounded efforts with measurable objectives did.

Background and statutory framework

Article XV, section 4, of the Oregon Constitution, as amended by Measure 66, dedicates 7.5% of net State Lottery proceeds to "the public purpose of financing the restoration and protection of wild salmonid populations, watersheds, fish and wildlife habitats and water quality." Article XV, section 4b, requires that at least 65% of those moneys be used for "capital expenditures."

Section 4b enumerates the types of activities the funds may support: watershed, fish and wildlife, and riparian and native species habitat conservation, including planning, coordination, assessment, implementation, restoration, inventory, information management, and monitoring; watershed and riparian education; and the development and implementation of watershed and water quality plans.

ORS 541.351(4) implements Article XV by establishing the operating framework for the Oregon Watershed Enhancement Board and its grant-in-aid programs. The "capital expenditure" definition under ORS 541.351(4) tracks the constitutional language.

The AG used standard PGE methodology to interpret the constitutional text and its statutory implementation. Because "capital expenditures" is an accounting and tax term, the opinion drew heavily on federal tax law (26 USC § 263, INDOPCO v. Commissioner, Moss v. C.I.R.) and the Oregon Tax Court's reading of "capital construction and improvements" in Gill v. Beaverton School Dist. 48 to fix the project-versus-maintenance line.

Citations

• Oregon Constitution Article XV, section 4 (Measure 66 dedicated Lottery funding)
• Oregon Constitution Article XV, section 4b (65% capital expenditure requirement)
• Ballot Measure 66 (1998) (Lottery dedication to salmon, watersheds, fish, wildlife, and water quality)
• ORS 541.351(4), 541.351(4)(b) (statutory definition of "capital expenditures")
• ORS 541.377(6)(a), 541.379(1) (65% minimum and related provisions)
• ORS 174.010 (rule against treating statutory terms as surplusage)
• PGE v. Bureau of Labor and Industries, 317 Or 606 (1993)
• Gaston v. Parsons, 318 Or 247 (1994) (well-defined legal meaning)
• Gill v. Beaverton School Dist. 48, 14 Or Tax 25 (1996) (capital construction meaning)
• Moss v. C.I.R., 831 F2d 833 (9th Cir 1987) (improvement vs. repair)
• Shatzer v. Dept of Revenue, 325 Or 211 (1997) (legislature may not override voter intent)

Source

• Landing page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
• Original PDF: https://www.doj.state.or.us/wp-content/uploads/2002/05/op2002-4.pdf

Original opinion text

HARDY MYERS

PETER D. SHEPHERD

Attorney General

Deputy Attorney General

DEPARTMENT OF JUSTICE
GENERAL COUNSEL DIVISION

May 28, 2002

Catherine E. Pollino, Director
Audits Division
Secretary of State
Public Service Building, Suite 500
Salem, Oregon 97310
Re:

Opinion Request OP-2002-4

Dear Ms. Pollino:
You have asked for advice concerning the provisions of Article XV of the Oregon
Constitution that authorize use of State Lottery money to restore and protect Oregon’s wild
salmonid populations, watersheds, fish and wildlife habitats and water quality. We set forth your
questions and our short answers below, followed by our analysis.
1.
Are expenditures for monitoring or evaluation activities “capital expenditures” under
ORS 541.351(4) or Article XV of the Oregon Constitution?
Yes, if the monitoring or evaluation activities are part of a specific project: (a) to restore a
wild salmonid population, watershed, fish or wildlife habitat, or water quality; (b) to protect or
conserve one of those resources, if the project is for the long-term betterment of the resource; or
(c) to realize long-term improvement in water quality in a specific area. Costs of monitoring or
evaluation activities not related to such a project, or that are ordinary costs of maintenance or
repair after a project is fully established, are not capital expenditures. In other words, the costs
of regular on-going monitoring of water quality, fish populations, watersheds or habitats are not
capital expenditures.
2.
Are expenditures for Department of Agriculture weed control “capital expenditures”
under ORS 541.351(4) or Article XV?
Yes, if the weed control is part of a specific project: (a) to restore a wild salmonid
population, watershed, fish or wildlife habitat, or water quality; (b) to protect or conserve one of
those resources, if the project is for the long-term betterment of the resource; or (c) to realize
long-term improvement in water quality in a specific area. Costs of weed control undertaken as
part of maintenance of an area that is already properly functioning are not capital expenditures.

1162 Court Street NE, Salem, OR 97310 Telephone: (503) 378-4620 Fax: (503) 378-3784 TTY: (503) 378-5938

Catherine E. Pollino, Director
June 4, 2002
Page 2

Discussion
At the general election on November 3, 1998, the people approved Ballot Measure 66,
which amended Article XV of the Oregon Constitution to authorize the use of 7.5% of the net
proceeds of the State Lottery for the “purpose of financing the restoration and protection of wild
salmonid populations, watersheds, fish and wildlife habitats and water quality.” 1/ Article XV,
section 4b, requires that no less than 65 percent of that money be used for “capital expenditures.”
It states:
Moneys disbursed for the public purpose of financing the restoration and
protection of wild salmonid populations, watersheds, fish and wildlife habitats
and water quality from the fund established under Section 4 of this Article shall
be administered by one state agency. At least 65% of the moneys will be used for
capital expenditures. These moneys, including grants, shall be used for all of the
following purposes:
(1) Watershed, fish and wildlife, and riparian and other native species,
habitat conservation activities, including but not limited to planning, coordination,
assessment, implementation, restoration, inventory, information management and
monitoring activities.
(2) Watershed and riparian education efforts.
(3) The development and implementation of watershed and water quality
enhancement plans.
(4) Entering into agreements to obtain from willing owners determinate
interests in lands and waters that protect watershed resources, including but not
limited to fee simple interests in land, leases of land or conservation easements.
(5) Enforcement of fish and wildlife and habitat protection laws and regulations
(emphasis added).
You ask whether monitoring, evaluation and weed control constitute “capital
expenditures,” as that term is used in Article XV, section 4b, and in ORS 541.351(4), which
defines the term for purposes of the implementing legislation.2/
The term “capital expenditures” is not defined in Article XV, nor is it used in any other
provision of the Oregon Constitution. It is permissible for the legislature to adopt a statute
clarifying terms used, but not defined, in constitutional measures, so long as the statute is
consistent with the constitution. Letter of Advice dated May 13, 1991, to Representative
Kelly Clark (OP-6407) at 8-9 citing Letter of Advice dated January 21, 1991, to Larry Cambell,
Speaker of the House (OP 6397) and Stevens v. Benson, 50 Or 269, 274, 91 P 577 (1907).
However, legislative action following the voters’ adoption of an initiated measure is not evidence
of voter intent in adopting that measure. Ester v. City of Monmouth, 322 Or 1, 10 n 5, 903 P2d

Catherine E. Pollino, Director
June 4, 2002
Page 3

344 (1995). Therefore, in answering your questions it is first necessary to determine what
meaning the voters intended for the term “capital expenditures” in Measure 66. We then can
determine whether the costs of monitoring, evaluation and weed control constitute capital
expenditures under Article XV, section 4b, and ORS 541.351(4).3/
In interpreting a constitutional measure adopted through the initiative process, such as
Ballot Measure 66, we first look at the text and context of the measure to determine the intent of
the voters. PGE v. Bureau of Labor and Industries, 317 Or 606, 612 n 4, 859 P2d 1143 (1993).
If the voters’ intent is clear from the text and context of the measure, the inquiry ends there. If
the voters’ intent is not clear from the text and context, we look to materials that disclose the
public’s understanding of the measure, such as information available to the voters at the time the
measure was adopted. Ecumenical Ministries v. Oregon State Lottery Comm., 318 Or 551, 560
n 8, 871 P2d 106 (1994). Sources of information of that nature include ballot titles, explanatory
statements and arguments in voters’ pamphlets, news stories and editorials. Id. We discern voter
intent with regard to use of the term “capital expenditures” in responding to your first question.
1.

Monitoring and Evaluation
a. Capital Expenditures

If a term is one of common usage, it typically should be given its “plain, natural, and
ordinary meaning,” PGE, 317 Or at 611, unless the context suggests that some other meaning
was intended or the words have a “well-defined legal meaning.” Gaston v. Parsons, 318 Or 247,
253, 864 P2d 1319 (1994). For capital expenditures, however, the ordinary and legal meanings
are essentially identical.
The dictionary definition of “capital expenditure” is “an expenditure for long-term
additions or betterments properly chargeable to a capital assets account.” WEBSTER’S THIRD
NEW INTERNATIONAL DICTIONARY (unabridged 1993 ed) (WEBSTER’S) at 332. “[C]apital assets”
is defined, in turn, as “long-term assets either tangible or intangible (as land, buildings, patents,
or franchises); specif: any assets so designated by statute or governmental regulation (as the U.S.
Internal Revenue Code) – contrasted with current assets.” WEBSTER’S at 332. In other words, a
“capital expenditure” is an expenditure for long-term additions or betterments regarded as capital
under law, including tax law.
In construing “capital construction and improvements” as used in Article XI, section 11b
of the Oregon Constitution (relating to property taxation), the Oregon Tax Court linked its plain,
natural, and ordinary meaning to tax law. Gill v. Beaverton School Dist. 48, 14 Or Tax 25, 2930 (1996). “Capital,” the court determined, suggests construction or improvements that “add
value beyond a single operating period or which add to the accumulating assets of the
governmental unit.” Id. at 31. The court went on to say:
This ordinary and usual meaning of capital construction or improvements is
consistent with widely known accounting and tax concepts, which have

Catherine E. Pollino, Director
June 4, 2002
Page 4

permeated much of the collective public mind. In contrast, operational supplies
would be typically acquired and distributed within a single fiscal period.
Id. at 32. In light of these dictionary definitions and given that “capital expenditures” is an
accounting and tax concept to begin with, we believe that federal tax principles likely
contributed to voters’ understanding of the term as used in Article XV.4/
In the tax context, capital expenditures are business expenses that cannot be deducted in
the year incurred, but are instead added to the basis of an asset and depreciated over time or used
to reduce capital gains at the time the asset is sold. INDOPCO, Inc. v. Comm’r, 503 U.S. 79,
83-84 112 SCt 1039, 117 L Ed2d 226 (1992). Everyone paying taxes on business income must
capitalize any amount “paid out for new buildings or for permanent improvements or betterments
made to increase the value of any property or estate” or “expended in restoring property or in
making good the exhaustion thereof for which an allowance is or has been made.” 26 USC §
263. In addition, 26 USC § 263A requires capitalization of direct and indirect costs allocable to
the acquisition or improvement of property.
Based on these sources,5/ we believe that the plain, natural and ordinary meaning of the
term “capital expenditures” is expenditures for long-term additions or long-term improvements
to assets, including restoration, subject to any modification or clarification called for by the
term’s context.
Context bears on the meaning of “capital expenditures” in at least three ways. First, the
sentence in Article XV, section 4b immediately following the 65 percent requirement for capital
expenditures states that “[t]hese moneys” must be used for “all” of the purposes listed in
subsections (1)-(6). This raises the question whether “these moneys” refers only to the moneys
used for capital expenditures or to all of the moneys disbursed under section 4b. The former
would imply that the activities listed in subsections (1)-(6) were intended to be the definition of
“capital expenditures.” However, some of those activities, such as “education efforts,” would
not come within any ordinary definition of the term “capital expenditures.” Moreover, if the
activities specified in subsection (1)-(6) are actually the subject of the 65 percent minimum, then
the term “capital expenditures” would have been surplusage, which is a construction to be
avoided. ORS 174.010. In contrast, the latter interpretation - - the moneys provided under
section 4b are to be used in some combination for all of the five identified purposes, with 65% of
the total being dedicated to capital expenditures - - presents no such problems. We therefore
regard this as the correct interpretation.
Second, the context in which capital expenditures is used sheds light on the nature of the
“asset” that is being supplemented or improved. As discussed above, a capital expenditure is
directed toward a long-term “asset,” which is an “item of value owned” or, in accounting, one of
a “series of items on a balance sheet representing the book values at a given date of resources,
rights, or items of property owned[.]” WEBSTER’S at 131. Ownership and improvements in
value are concepts more common to business than to watersheds, habitats, fisheries, and water
quality. We think, however, that the context clarifies the meaning of “asset” and “capital
expenditure” here. Article XV, section 4b specifies that 50% of the money in the parks and

Catherine E. Pollino, Director
June 4, 2002
Page 5

natural resources fund is to be disbursed to restore or protect wild salmonid populations,
watersheds, fish and wildlife habitats and water quality. Each of the four is a resource with
value, i.e., it benefits the people living in the state as a source of food, livelihood, environmental
health, or recreation and natural beauty.
Finally, the first sentence of section 4b tells us that not every expenditure resulting in a
long-term addition to or betterment of one of the four listed resources is authorized. Rather, only
those expenditures that restore or protect a listed resource are authorized.
We therefore conclude that, as used in Article XV, section 4b “capital expenditures” are
expenditures for long-term additions to or betterment of wild salmonid populations, watersheds,
fish and wildlife habitats, or water quality, if the addition or betterment serves to restore or
protect those assets. This definition of capital expenditure would include the purchase of
personal property that has a useful life longer than a single fiscal period, i.e., one biennium, and
that is to be used in the restoration or protection of wild salmonid populations, watersheds, fish
and wildlife habitats and water quality.
b. Expenditures for Monitoring and Evaluation
We turn to the question of whether the costs of monitoring or evaluation activities
constitute capital expenditures. In asking this question, you note that the purchase of monitoring
equipment or machinery to tabulate monitoring or evaluation data may be a capital expenditure
under generally accepted accounting principles, but that a monitoring or evaluation activity, e.g.,
“counting fish [or] checking stream temperature,” would not. We agree that the purchase of
equipment or machinery that has a useful life longer than a single fiscal period, and that is used
for the purposes described above is a capital expenditure. We also agree that counting fish or
checking stream temperature and other forms of monitoring or evaluation, standing alone, would
not qualify. However, where monitoring or evaluation costs are directly related to specific
projects for additions to or long-term betterment of a wild salmonid population or watershed or
habitat area, or to improving water quality in a specific area, they may qualify as capital
expenditures under Article XV, section 4b.
In understanding how long-term improvement differs from maintenance and repair, tax
law is again instructive. As discussed above, expenditures for permanent improvements that
increase or restore a property’s value are capitalized. These costs can include monitoring or
evaluation. See Internal Revenue Service, Revenue Ruling 74-104, 1974-1 C.B. 70 (evaluation
costs in connection with the acquisition of property for renovation and resale are capital
expenditures). On the other hand, monitoring or evaluation activities that are not part of an effort
to create or improve a specific area or fishery are more akin to maintenance or repair costs,
which are not capitalized. The distinction, according to many courts, including the Ninth Circuit
Court of Appeals, is that an expenditure “made to ‘put’ the particular capital asset in efficient
operating condition” is for an improvement and therefore capitalized, while an expenditure
“made merely to ‘keep’ the asset in efficient operating condition” is for a repair. Moss v. C.I.R.,
831 F2d 833, 835 (9th Cir 1987) citing Estate of Walling v. Commissioner, 373 F2d 190, 192-3
(3rd Cir 1967). See also, Revenue Ruling 66-18, 1966-1 C.B. 59 (costs of establishing Christmas

Catherine E. Pollino, Director
June 4, 2002
Page 6

tree stand are capital expenditures, but ongoing costs once trees are established and growing
freely are deductible as ordinary business expenses).
Whether a particular expenditure is for an improvement or for a repair depends upon its
context. Moss at 835-36. Courts have devised the “rehabilitation doctrine,” which provides that
“an expenditure made for an item which is part of a ‘general plan’ of
rehabilitation, modernization, and improvement of the property, must be
capitalized, even though, standing alone, the item may appropriately be classified
as one of repair.” United States v. Wehrli, 400 F2d 686, 689 (10th Cir 1968).
Whether such a plan exists depends upon a “realistic appraisal of all the
surrounding facts and circumstances, including, but not limited to, the purpose,
nature, extent, and value of the work done[.]”
Moss, 831 F2d at 836. This doctrine, which seems a logical elaboration of the term’s ordinary
meaning, tells us that monitoring or evaluation expenses that are part of a specific plan to restore
or protect habitat, water quality or specific fisheries over the long-term may also qualify as
capital expenditures.
Accordingly, we conclude that costs of monitoring or evaluation occurring as part of a
project to restore a wild salmonid population, watershed or fish and wildlife habitat, or to realize
long-term improvement in water quality in a specific area would be capital expenditures that may
be counted against the 65% minimum specified in Article XV, section 4b. Likewise, those same
costs incurred as part of a project to protect or restore one of the resources specified in section 4b
would be capital expenditures if the project is for the long-term betterment of the resource. At
the same time, costs to monitor or evaluate in order to maintain or preserve a resource that is
already functioning as intended would not be capital expenditures.
A particular type of expenditure may change in character over time. For example, the
state may choose to use Article XV moneys to fund the restoration of a riparian habitat. The
restoration project may provide for building a fence to keep livestock away from a stream,
replacing invasive plants along the stream with native plants and placing large woody debris in
the stream. To help ensure that the habitat is restored, regular monitoring and evaluation may be
necessary to identify areas requiring replanting or areas where debris has washed out vegetation
that needs to be replaced. The cost of such monitoring and evaluation would be a capital
expenditure. On the other hand, once the habitat has been restored and is functioning as
intended, periodic monitoring of fencing, plants and debris would be an ordinary expense of
maintaining the habitat area. While such monitoring may be part of a larger effort to protect or
conserve a functioning habitat, its cost could not be characterized as a capital expenditure
because it is aimed at maintaining the status quo, rather than achieving a long-term betterment.
Likewise, the cost of monitoring or evaluation activities used in an effort to track and better
understand water quality trends in a particular water basin or throughout the state would not be a
capital expenditure. In such a situation, the research would not be associated with a specific
project intended to add to or improve any particular capital asset.

Catherine E. Pollino, Director
June 4, 2002
Page 7

c.

ORS 541.351(4)

Your first question also asks whether monitoring and evaluation activities are “capital
expenditures” as that term is defined in ORS 541.351(4), which raises the preliminary question
whether or to what extent the term’s statutory definition may lawfully differ from its
constitutional meaning.
As stated above, the legislature may clarify terms used but not defined in a constitutional
provision. However, the legislature is bound by constitutional provisions and may not enact a
statute that is contrary to specific constitutional provisions. 44 Op Atty Gen 431, 436 (1985).
Moreover, there is nothing in Article XV authorizing the legislature to define “capital
expenditures” for purposes of that constitutional provision without reference to the meaning
intended by the voters for that term. Shatzer v. Dept of Revenue, 325 Or 211, 219, 934 P2d
1119 (1997) (“The legislature may not override the voters’ will and give unintended meaning to
[a constitutional provision adopted by initiative]”). On the other hand, Article XV, section 4b
permits the use of up to 35% of section 4b moneys for section 4b purposes other than capital
expenditures. This means that the legislature may direct that moneys be expended on things it
regards as capital expenditures, even if the constitution does not, as long as (1) the moneys are
expended only for purposes authorized by section 4b as a whole; (2) at least 65% of section 4b
moneys are used for capital expenditures as the term is used in the constitution; and (3) some
moneys are spent for each of the purposes specified in subsections (1)-(6). With those
parameters in mind, we see two potential disparities between the constitutional and statutory
meanings.
First, Article XV, section 4b(3) authorizes expenditures to develop and implement
“watershed and water quality enhancement plans,” but for wild salmonid populations and fish
and wildlife habitats, section 4b says nothing of enhancement and authorizes expenditures only
for restoration and protection. However, the statutory definition of “capital expenditures”
includes direct expenses related to “[p]rojects that restore, enhance or protect fish and wildlife
habitat, watershed functions, native salmonid populations or water quality.” ORS 541.351(4)(b)
(emphasis added).
To “enhance” an asset means to increase its value or worth. WEBSTER’S at 753. This
may be done in more than one way. For example, a person may enhance a historic home by
adding a level to the existing structure. However, a historic home may also be enhanced by
being restored to its original condition. If we interpret “enhance” in ORS 541.351(4)(b) to mean
increase an asset’s worth or value through restoration or protection, then the term is consistent
with Article XV, section 4b. It is a settled principle of statutory construction that a court may not
adopt an interpretation of a statute that renders it unconstitutional “if another construction is
reasonable which will uphold the constitutionality of the statute.” State v. Harmon, 225 Or 571,
577, 358 P2d 1048 (1961). Because we find reasonable an interpretation of “enhance” in ORS
541.351(4)(b) that is limited to increasing an asset’s worth or value by means of restoration or
protection, and in light of the principle stated in Harmon, we adopt this interpretation.6/ As so
interpreted, we conclude that ORS 541.351(4)(b) does not define “capital expenditures” more
broadly than was intended by the voters in adopting Article XV, section 4b.

Catherine E. Pollino, Director
June 4, 2002
Page 8

The second question is whether ORS 541.351 gives “capital expenditures” a meaning
narrower than that intended by the voters. It appears to do so in two ways. First, the statutory
definition for “capital expenditures” incorporates statutory definitions for “protect” and
“restore.” “Protect” is defined as “to minimize or mitigate adverse effects on salmonid and
habitat[.]” ORS 541.351(8). “Restore” is defined as “to take actions likely to achieve
sustainable population levels of native fish or wildlife and their habitats.” ORS 541.351(9).
Article XV, section 4b authorizes the use of lottery funds to “restore and protect” wild salmonid
populations, watersheds, fish and wildlife habitats and water quality without defining either term.
There is nothing in the text or context of Article XV, section 4b, however, to suggest the voters
intended to narrow the plain, natural and ordinary meaning of “restore” and “protect.” The
construction we give to “enhance” subsumes the ordinary meaning of “restore,” but the statutory
definition of “protect” appears narrower than the meaning of that term in Article XV, Section 4b.
For example, the constitution authorizes capital expenditures for the protection of water quality,
without regard to whether the project minimizes or mitigates adverse effects on salmonid and
habitat. Second, the statutory definition of “capital expenditures” covers the purchase of
personal property with a long-term use only if it is to be used to enforce fish and wildlife and
habitat protection law, which is not a limitation that would have been understood by voters to be
part of the term’s constitutional meaning.
Article XV, section 4b and ORS 541.377(6)(a) both require that at least 65% of section
4b moneys be used for capital expenditures, but they appear to define the term in slightly
different ways. Other statutes provide for the possibility that more than 65% of the moneys may
be used for capital expenditures. See ORS 541.377(6)(b) and 541.379(1). If the narrower
meaning given to “protect” and “personal property” by ORS 541.351 should result in some
activities that are capital expenditures under the constitutional provision not being so classified
under the statute, then it will be necessary to separately calculate whether the 65% minimum has
been met under the constitution and under the statute.
2.

Weed Control Activities

Your second question asks whether the costs of weed control activities constitute capital
expenditures. You note that the legislature has budgeted Measure 66 funds to the Department of
Agriculture for weed control. As in the case of monitoring or evaluation, the purchase of weed
control equipment or machinery with a useful life longer than a single fiscal period is a capital
expenditure under the constitution if that equipment or machinery is used to restore or protect
one of the resources identified in Article XV, Section 4b.
As with monitoring or evaluation, for the cost of weed control activities to be a capital
expenditure, the activities must be part of a specific project to restore or protect a wild salmonid
population, watershed or habitat area, or water quality in a particular area. Where invasive
weeds have become established and the weed control project is directed at restoring an area by
removing the weeds in a manner that will provide a long-term benefit, then the costs are capital
expenses. Similarly, weed control activities that are part of a project to protect a watershed or
other resource by preventing further weed encroachment will be a capital expenditure if the costs

Catherine E. Pollino, Director
June 4, 2002
Page 9

are expected to result in the long-term control or eradication of the weeds. Conversely, costs for
maintenance, e.g., periodic spraying of herbicides or mowing of an area that is already
functioning as intended, are not capital expenditures even if they are part of a project designed to
protect the resource through maintenance. In a different context, costs to map trends in weed
distribution, if the mapping is not part of a project for the long-term betterment of a particular
resource, are not capital expenditures.
Although ORS 541.351(4) does not specifically reference “weed control,” it could be part
of a project to enhance, restore or protect any of the resources covered by the statute. Therefore,
we conclude that the statute allows for weed control costs in some circumstances. As with the
costs of monitoring and evaluation activities, if there are any weed control costs that meet the
constitutional but not the statutory definition, then it will be necessary to tally the expenditures
for each separately.
Sincerely,

Donald C. Arnold
Chief Counsel
General Counsel Division
DCA/KBC/RMW/DNH/dfp/naw:GENC0038
c: Geoffrey Huntington

1/

Article XV provides in relevant part:
SECTION 4 (4)(d) There is hereby created within the General Fund the Oregon
State Lottery Fund which is continuously appropriated for the purpose of administering
and operating the Commission and the State Lottery. The State Lottery shall operate as a
self-supporting revenue-raising agency of state government and no appropriations, loans,
or other transfers of state funds shall be made to it. The State Lottery shall pay all prizes
and all of its expenses out of the revenues it receives from the sale of tickets or shares to
the public and turnover the net proceeds therefrom to a fund to be established by the
Legislative Assembly from which the Legislative Assembly shall make appropriations for
the benefit of any of the following public purposes: * * * or restoring and protecting
Oregon's parks, beaches, watersheds and critical fish and wildlife habitats. * * *.
(5) Effective July 1, 1999, 15% of the net proceeds from the State Lottery shall
be deposited in a parks and natural resources fund created by the Legislative Assembly.
Of the moneys in the parks and natural resources fund, * * * and 50% shall be distributed
for the public purpose of financing the restoration and protection of native salmonid
populations, watersheds, fish and wildlife habitats and water quality in Oregon. The
Legislative Assembly shall not limit expenditures from the parks and natural resources
fund. The Legislative Assembly may appropriate other moneys or revenue to the parks
and natural resources fund.

Catherine E. Pollino, Director
June 4, 2002
Page 10
2/

ORS 541.351(4) defines “capital expenditures” to mean “direct expenses related to”

(a) Personal property of a nonexpendable nature including items that are not consumed
in the normal course of operations, can normally be used more than once, have a useful life of
more than two years and are for use in the enforcement of fish and wildlife and habitat
protection laws and regulations; or
(b) Projects that restore, enhance or protect fish and wildlife habitat, watershed
functions, native salmonid populations or water quality, including but not limited to:
(A) Expenses of assessment, research, design or other technical requirements
for the implementation of a project;
(B) The acquisition of determinate interests, including fee and less than fee
interests, in land or water in order to protect watershed resources, including appraisal
costs and other costs directly related to such acquisitions;
(C) Development, construction or implementation of a project to restore,
enhance or protect water quality, a watershed, fish or wildlife, or riparian or other
habitat;
(D) Technical support directly related to the implementation of a project; and
(E) Monitoring or evaluation activities necessary to determine the actual
effectiveness of a project.
3/

Normally, when a case presents both statutory and constitutional issues for decision, a court
addresses the statutory issue first because it will not decide constitutional questions “if there is an
adequate subconstitutional basis for decision.” Leo v. Keisling, 327 Or 556, 562, 964 P2d 1023 (1998).
Because your questions regarding the constitutional meaning of “capital expenditures” are not subject to
resolution by a statutory analysis, and for the sake of analytical clarity, we address your constitutional
questions first and your statutory questions second.
4/

Oregon statutes addressing both personal income and corporate excise tax are based on federal law.
See ORS 316.022(6) (“‘Taxable income’ means the taxable income as defined in * * * the Internal
Revenue Code[.]”); ORS 317.013(1) (“Those portions of * * * Internal Revenue Code, and any other laws
of the United States pertaining to the determination of taxable income of corporate taxpayers, are adopted
by reference as a part of this chapter.”).
5/

A review of the relevant Voters’ Pamphlet materials and pre-election media coverage of Measure
66 does not assist in determining voter intent with regard to the meaning of “capital expenditures.”
6/

We recognize that our interpretation of “enhance” results in overlapping meanings for “enhance,”
“restore,” and “protect” as used in ORS 541.351(4)(b) and related statutes. Oregon courts follow the
maxim of statutory construction that the legislature’s use of different terms in related portions of a statute
likely indicates an intent for the terms to have different meanings. State v. Adams, 315 Or 359, 366, 847
P2d 397 (1993). However, the courts also have observed that “blind application” of the maxim “may lead
to absurd results.” State v. Foley, 125 Or App 423, 428, 865 P2d 465 (1993). In this case, where an
interpretation of “enhance” that did not overlap with the plain, natural and ordinary meanings for
“restore” and “protect” would be contrary to the terms of the Oregon Constitution, we believe that a court
would not apply the maxim.