HOUSE BILL ANALYSIS

                  HB 2360

  Title:  An act relating to financing contracts.

Brief Description:  Authorizing financing contracts.

Sponsors:  Representatives L. Thomas, Romero, Huff, Wolfe, Ogden, H. Sommers, D. Schmidt, Gardner and Anderson; by request of State Treasurer.

HOUSE COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

Meeting Date:  January 21, 1998

Bill Analysis Prepared by:  Charlie Gavigan, Counsel (786-7340)

Background:  State agencies are authorized to enter into financing contracts for the acquisition of real and personal property where the contracts provide payments over a term of more than one year but less than 30 years.  These financing contracts are exempted from the definition of debt in the computation of the statutory and constitutional debt limits.  State agencies are authorized to issue certificates of participation or other types of financing structures subject to the approval of the state finance committee.   The Legislature must approve all such contracts for the purchase of buildings and land.  The finance committee may also consolidate existing and new financing contracts into a master contract and make rules for the issuance of financing contracts.

Typically, the State Treasurer issues tax-exempt certificates of participation to private investors and then uses the proceeds to purchase equipment or real estate for state agencies.  The state agencies make lease payments from their operating budget to the State Treasurer to repay the investors.   The state receives title to the property when the contract payments are completed.  The full faith and credit of the state does not stand behind these certificates of participation like it does for the issuance of bonds. 

Summary of Bill:   The authorization allowing the State Treasurer to administer a financing contract program for state agencies is expanded to include local governments. With the approval of the local governing body, the State Treasurer can lend money to the local government to purchase equipment or real estate.  Like the state program, the State Treasurer raises the funds through issuing certificates of participation to private investors. The investors are repaid from lease payments made by the local government.  Financing under this program is exempt from the local debt limit. 

The State Treasurer is authorized to charge fees to state and local governments to cover administrative costs.

Appropriation:  None

Fiscal Note:  Ordered January 19, 1998

Effective Date:  Ninety days after adjournment of session in which bill is passed.

  Rulemaking Authority.  None specified.