HOUSE BILL REPORT

HB 263

BYRepresentatives Haugen, Prince, Hine, L. Smith and P. King; by request of  Department of Community Development

Authorizing public loans to municipal corporations without the issuance of bonds.

House Committe on Local Government

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (13)

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

House Staff:Steve Lundin (786-7127)

AS REPORTED BY COMMITTEE ON LOCAL GOVERNMENT FEBRUARY 12, 1987

BACKGROUND:

The public works trust account was established in 1985 to make loans to local governments to construct, repair, rehabilitate and improve streets and roads, bridges, storm and sanitary sewers, and water systems.  School districts and port districts are not eligible to receive such loans.  This account consists of a portion of the receipts from the state utility tax on sewer facilities and water facilities, a portion of the receipts from the state excise tax on real estate conveyances, and a portion of the receipts from the state sales tax on solid waste collection.

The constitution establishes limitations on the amount of general indebtedness that a local government may incur.  Statutes restrict local governments to a lesser amount of general indebtedness than the constitution.  Many local governments are authorized to incur general indebtedness without voter approval, as well as general indebtedness with voter approval.

Statutes allow a bond to be issued that is in any form, or even in a non-physical form.

SUMMARY:

SUBSTITUTE BILL:  Local governments are authorized to evidence loan agreements with the federal government or state government without issuing a bond.  The loan agreements may specify that the loan constitutes a revenue type obligation or a general indebtedness type obligation.  Loan agreements entered into between a local government and the state or federal government, that are of the nature of a general indebtedness, do not constitute indebtedness under the statutory indebtedness limitations.

An emergency clause is included in the bill.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The bill is limited to loan agreements between a local government and the state or federal government.

Fiscal Note:    Not Requested.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:     Pete Butkus, Department of Community Development; and Stan Finkelstein, Association of Washington Cities.

House Committee - Testified Against: None Presented.

House Committee - Testimony For:     (1) The trend is for loans instead of grants to be made by the state or federal governments to local governments for specific projects.  (2) Some cities are up against their constitutional debt ceilings.  (3) This will save money that was involved with issuing bonds.

House Committee - Testimony Against: None Presented.