HOUSE BILL REPORT

HB 1032

BYRepresentatives Holland, H. Sommers, Fuhrman, Sayan, Heavey and Betrozoff; by request of Legislative Budget Committee

Providing for general obligation bonds.

House Committe on Capital Facilities & Financing

Majority Report:  Do pass.  (9)

      Signed by Representatives H. Sommers, Chair; Rasmussen, Vice Chair; Schoon, Ranking Republican Member; Beck, Bowman, Braddock, Fraser, Jacobsen and Peery.

House Staff:Bill Robinson (786-7136)

AS PASSED HOUSE MARCH 8, 1989

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 the 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:

The bill allows the state finance committee to issue the following bond authorizations at a discounted rate.

      a)Referendum 26 waste disposal facilities, 1972

      b)Referendum 38 water supply facilities, 1979

      c)Referendum 39 waste disposal and management facilities, 1980

      d)Salmon enhancement facilities, 1977

The discounted rate will increase the size of the bond issue but will have no effect on the amount of money available for projects financed by the bond issues.  The January 1, 1990 expiration date for referendum 39 bonds is removed.

Fiscal Note:      Available.

House Committee ‑ Testified For:    Frank Hensley, Legislative Budget Committee; Doug Extine, State Treasurer's Office.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Most state general obligation bonds are sold at a discount and extending the discount authority to these specific bond sales would remove any penalty the state would pay when issuing these bonds.

House Committee - Testimony Against:      None Presented