SENATE BILL REPORT

SHB 1652

BYHouse Committee on Local Government (originally sponsored by Representatives Cooper, Ferguson, Haugen, Beck, Sayan, Holm, Nealey, Zellinsky, D. Sommers, Nutley, Butterfield, Sutherland, Spanel, Peery and Baugher)

Providing for the investment of public funds.

House Committe on Local Government

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 23, 1988

Majority Report:  Do pass as amended.

      Signed by Senators McCaslin, Chairman; Zimmerman, Vice Chairman; DeJarnatt, Garrett.

Senate Staff:Barbara Howard (786-7410)

                  February 24, 1988

AS REPORTED BY COMMITTEE ON GOVERNMENTAL OPERATIONS, FEBRUARY 23, 1988

BACKGROUND:

The state treasurer and treasurers of local governments are authorized to invest public money in their possession in a variety of instruments.

The county treasurer is the treasurer for most special districts, as well as for the county.  Some special districts are authorized to appoint their own treasurer, who can act for the special district with the same authority as the county treasurer, including the authority to invest the district's money in the same types of investments.  Authorized types of investments include federal bonds or notes, savings or time accounts of public depositories, and bankers acceptances purchased on the secondary market.

Cities and towns have their own fiscal officers who invest their funds.  Cities and towns may invest public money in federal bonds and notes, state bonds or warrants, general obligation or utility revenue bonds of their own or another city or town in the state, their own local improvement district bonds, and any other investment authorized for any other taxing district in the state.

Metropolitan municipal corporations (metros) are authorized to have their funds invested in anything in which a mutual savings bank may invest.

The state treasurer is authorized to invest or deposit state funds in public depositories, federal bonds and notes, state and local bonds and warrants, bankers acceptances purchased on the secondary market, negotiable certificates of deposit with commercial or mutual savings banks doing businesses in the state, and commercial paper.

Local governments are authorized to join together and create joint self insurance pools.  A list of potential investments is included in law in which money placed into these joint self insurance pools may be invested.

The state treasurer and county treasurers are authorized at the request of local governments to combine or "pool" the funds of different local governments and invest these combined funds.  While the state treasurer may recover administrative costs for local investment pools, county treasurers may not.

SUMMARY:

The state and all local governments and local government insurance pools are authorized to invest their money in the following:

(1)  Bonds of the state or any local government in the state that have one of the three highest credit ratings of a nationally recognized rating agency;

(2)  General obligation bonds of another state, or local government in another state, that has one of the three highest credit ratings of a nationally recognized rating agency; and

(3)  Any investment authorized by law for the treasurer of the state of Washington or any local government in the state, other than metropolitan municipal corporations (metros).

A county treasurer creating an investment pool in which funds of local governments are combined for investment purposes may deduct amounts from the pool's earnings to reimburse the county for the initial administrative costs in creating all investment pools.

SUMMARY OF PROPOSED SENATE AMENDMENTS:

A public transit benefit area (PTBA) may designate its own treasurer, without prior approval of the county treasurer.

Investment authority is expanded to permit funds subject to federal arbitrage provisions to be invested in selected mutual funds and money market funds.  The mutual funds and money market funds must consist of selected government bonds and securities otherwise authorized by law for investment by local governments.  The manager of an affected mutual fund or money market fund must post a bond with the Risk Management Office of the Department of General Administration equal to 5 percent of the amount invested.  In addition, public funds may be invested in registered warrants of local governments in the same county as the investor.

Severability and emergency clauses are added.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: County Treasurers Sharon Shrader, Kitsap County; Ruth Wylie, Skagit County; Doug Lasher, Clark County and Ron Strabbing, Grays Harbor County; Bill Carbah, State Treasurer's office; Marilyn Showalter, Foster, Pepper & Shefelman