HOUSE BILL REPORT

SHB 1652

BYHouse Committee on Local Government (originally sponsored by Representatives Cooper, Ferguson, Haugen, Beck, Sayan, Holm, Nealey, Zellinsky, D. Sommers, Nutley, Butterfield, Sutherland, Spanel, Peery and Baugher)

Providing for the investment of public funds.

House Committe on Local Government

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (12)

      Signed by Representatives Haugen, Chair; Cooper, Vice Chair; Beck, Bumgarner, Butterfield, Ferguson, Hine, Nealey, Nelson, Nutley, Rayburn and Zellinsky.

Minority Report:  Do not pass.  (1)

      Signed by Representative Jones.

House Staff:Steve Lundin (786-7127)

AS PASSED HOUSE FEBRUARY 16, 1988

BACKGROUND:

The treasurers of local governments and the state are authorized to invest public money in their possession in a variety of investments.

The county treasurer is the treasurer for the county and most special districts.  Some special districts are authorized to appoint their own treasurer, who can act for the special district with the same authority as the county treasurer, including the authority to invest the district's money in the same types of investments.  County treasurers are authorized to invest public moneys in a variety of investments, including federal bonds or notes, savings or time accounts of public depositories, and bankers acceptances purchased on the secondary market.

Cities and towns have their own fiscal officers who invest their funds.  Cities and towns are authorized to invest public money in federal bonds and notes, state bonds or warrants, general obligation or utility revenue bonds of their own or another city or town in the state, their own local improvement district bonds, and any other investment authorized for any other taxing district in the state.

Metropolitan municipal corporations (metros) are authorized to have their funds invested in anything in which a mutual savings bank may invest.

The state treasurer is authorized to invest or deposit its funds in public depositories, federal bonds and notes, state and local bonds and warrants, bankers acceptances purchased on the secondary market, negotiable certifies of deposit with commercial or mutual savings banks doing businesses in the state, and commercial paper.

Local governments are authorized to join together and create joint self insurance pools.  A list of potential investments is included in law in which money placed into these joint self insurance pools may be invested.

County treasurers are authorized at the request of local governments to combine the funds of different local governments and invest these combined funds.

SUMMARY:

The state and all local governments and local government insurance pools are authorized to invest their money in the following:

(1)  Bonds of the state or any local government in the state that have one of the three highest credit ratings of a nationally recognized rating agency;

(2)  General obligation bonds of another state, or local government in another state, that has one of the three highest credit ratings of a nationally recognized rating agency; and

(3)  Any investment authorized by law for the treasurer of the state of Washington or any local government in the state, other than metropolitan municipal corporations (metros).

A county treasurer creating an investment pool in which funds of local governments are combined for investment purposes may deduct amounts from the pool's earnings to reimburse the county for the initial administrative costs in creating the investment pool.

EFFECT OF SENATE AMENDMENT(S):   1) The state and local governments can invest moneys in any registered warrants of any government located in the same county as the government making the investment.

2) The state and local governments can invest moneys that are subject to federal arbitrage provisions, in the following: (a) mutual funds consisting of federal bonds, with average maturities of less than four years, and bonds of any state or local government that have one of the four highest ratings of a nationally recognized rating agency; b) money market funds consisting of bonds of states and local governments, or other issuers authorized by law for investment by local governments, with one of the two highest credit ratings of a nationally recognized rating agency; and c) money market funds consisting of any securities authorized by law for investment by local governments.

Any mutual fund or money market fund in which such moneys are invested must post a bond with the state risk manager equal to at least five percent of the amount invested in the fund by governments in this state.

3) A public transit benefit area authority would no longer have to obtain the approval of the county treasurer to designate someone other than the county treasurer to act as its treasurer.

4) The amount of time is extended after a work period has been completed by which counties must pay their employees.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Ron Strabbing, Grays Harbor County Treasurer; Marilyn Showalter, Foster, Pepper and Shefelman; Sharon Shrader, Kitsap County Treasurer; Ruth Wylie, Skagit County Treasurer; and Doug Lasher, Clark County Treasurer.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    This gives added investment flexibility.  Federal arbitrage laws restrict investments, so local governments need to temporarily invest in tax exempt securities with high yields.

House Committee - Testimony Against:      No investment guidance is provided.

VOTE ON FINAL PASSAGE:

      Yeas 97; Excused 1

Excused:    Representative Smith C