SENATE 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

Senate Committee on Ways & Means

Senate Hearing Date(s):February 29, 1988

Majority Report:  Do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bauer, Bluechel, Cantu, Deccio, Fleming, Gaspard, Hayner, Johnson, Lee, Newhouse, Saling, Smith, Talmadge, Williams.

Senate Staff:Lynn French (786-7715)

                  February 29, 1988

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 29, 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 bonds may be sold to the public at face value rather than at a premium after the underwriters add 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.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

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

Senate Committee - Testified: No one