HOUSE BILL REPORT

SSB 6023

As Amended by the House

BYSenate Committee on Agriculture (originally sponsored by Senators Hansen, Barr, Fleming and Newhouse)

Authorizing port districts to mortgage industrial development facilities, including agricultural facilities.

House Committe on Trade & Economic Development

Majority Report:  Do pass.  (14)

      Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Amondson, Beck, Belcher, Cantwell, Doty, Grant, Hargrove, Holm, Kremen, McLean, Moyer and Rasmussen.

House Staff:Stephen Hodes (786-7092)

AS PASSED HOUSE APRIL 9, 1987

BACKGROUND:

Port districts may construct and maintain a wide variety of commercial facilities and industrial improvement under the existing port district enabling statute.  Port districts may also establish industrial development districts within district boundaries under current provisions of law. Specific and general authority granted under the Industrial Revenue Bonds Act authorizes port districts to contract debt and to issue bonds to finance commercial and industrial facilities for private firms through the issuance of industrial revenue bonds.  Industrial revenue bonds permit private firms to take advantage of the lower interest rates associated with tax-exempt financing.  Under the provisions of the Industrial Revenue Bonds Act, private firms utilizing the industrial revenue bonds may secure them with mortgages or liens on the facilities financed by the bonds.

Industrial revenue bond issuance in the state is limited to tax-exempt issues as a result of the provisions of the amendment to the state constitution which permitted the issuance of such bonds in the state.  Before the passage of the amendment, issuance was construed as a violation of the state constitutional restrictions against the lending of public credit.  The federal tax benefits granted for industrial revenue bonds are to expire after 1989 under the provisions of the federal Tax Reform Act of 1986.  State governments have developed allocation mechanisms and formulae to regulate access to the limited tax-exempt bond capacity available under the Tax Reform Act.

Port districts have the authority to issue revenue bonds to construct and maintain commercial facilities and industrial improvements in situations in which they maintain ownership of the facilities.  They do not have the authority to mortgage or encumber their facilities to secure payment of their bonds.  Ports also have the authority to assist private firms to construct facilities under private ownership through the issuance of industrial revenue bonds, and private firms may mortgage or encumber facilities financed in this way, but all such bonds must be tax-exempt.  The issuance of taxable bonds is prohibited by statutory and constitutional provisions.

SUMMARY:

A port district is authorized to mortgage or otherwise encumber industrial development facilities to secure payment of revenue bonds to such facilities.  The mortgage or encumbrance is limited to those port district industrial facilities being financed by the bonds.  The port property and facilities which the port districts can finance by authorizing revenue bonds specifically include facilities for freezing or processing agricultural products.

Fiscal Note:      Requested March 26, 1987.

House Committee ‑ Testified For:    Darrell Russell, Washington Public Ports Association.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The capacity to mortgage port facilities would provide added security and permit easier marketing of port district bonds financing industrial facilities.

House Committee - Testimony Against:      None Presented.