HOUSE BILL REPORT

HB 1554

BYRepresentatives H. Sommers, B. Williams, Brekke, Fuhrman, Silver, Brough, Moyer, May and D. Sommers 

Authorizing the sale of bonds at a discount.

House Committe on Ways & Means

Majority Report:  Do pass.  (26)

      Signed by Representatives Grimm, Chair; Bristow, Vice Chair; Appelwick, Belcher, Braddock, Brekke, Brough, Butterfield, Dellwo, Fuhrman, Grant, Hine, Locke, McLean, Nealey, Peery, Rust, Sayan, Schoon, Silver, H. Sommers, Spanel, Taylor, Wang, B. Williams and Winsley.

House Staff:Bill Robinson (786-7136)

AS PASSED HOUSE FEBRUARY 16, 1988

BACKGROUND:

The 1986 legislature, in the supplemental budget, directed the Legislative Budget Committee to study the state's debt issuance practices. The main objective of the study was to seek means of reducing the cost of capital projects by either, (1) reducing the bond issuance cost, or (2) using "pay as you go" financing rather than debt financing.

The Legislative Budget Committee completed its study in September 1987 and forwarded its recommendations to full legislature. One of the recommendations was to amend Referenda 26, 38, and 39 to allow the remaining authorized bonds to be sold at a discount. The advantage of discounted bonds is that it allows the bonds to be sold to the public at face value rather than at a premium after the underwriters add to the price of the bonds their cost of marketing the bonds. The result will make state bonds more attractive in the bond market and, therefore, lower interest rates to the state.

SUMMARY:

HB 1554 amends the following state bond issues:

1. Referendum 26 waste disposal facilities, 1972

2. Referendum 38 water supply facilities,1979

3. Referendum 39 waste disposal and management facilities, 1980

4. Salmon enhancement facilities, 1977

The amendments allow the state finance committee to issue the above bond authorizations at a discounted rate. The discounted rate will increase the size of the bond issue but will have no effect on the amount of money available for the projects financed by the bond issues.

Fiscal Note:      Available.

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

House Committee ‑ Testified For:    Doug Extine, State Treasurer's Office.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Explained the process for issuing state bonds and described the differences between discounted bonds and par value bonds.  Testified that it is to the state's advantage to issue discounted bonds.

House Committee - Testimony Against:      None Presented.