HOUSE BILL REPORT

HB 1484

BYRepresentatives H. Sommers, Schoon, Sayan and Rasmussen; by request of Governor Gardner

Authorizing the issuance of state general obligation bonds to finance projects in capital and operating budgets for the 1989-91 biennium.

House Committe on Capital Facilities & Financing

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (13)

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

House Staff:Bill Robinson (786-7136)

AS REPORTED BY COMMITTEE ON CAPITAL FACILITIES & FINANCING

APRIL 17, 1989

BACKGROUND:

The State of Washington periodically issues general obligation bonds to finance capital construction projects throughout the state.  The specific legislative approval of a capital project is contained in the capital appropriations act.  Those capital appropriations in the capital budget requiring state bonding must have separate legislation authorizing the sale of the bonds.

A number of bond authorizations from prior years have small amounts of bonds remaining to be issued making the administrative and issuing expenses of these small volumes uneconomical.  The State Finance Committee has indicated that these smaller issues can be pooled together and sold as a single transaction and thus reduce the cost of issuance.

SUMMARY:

SUBSTITUTE BILL:  The State Finance Committee is authorized to issue general obligation bonds for the State of Washington in the amount of one billion, two hundred twenty-seven million dollars.  $497.9 million of this amount is new general obligation bonds necessary to support the 1989-91 capital budget; $493.8 million is not new bond authority, but the authorization to consolidate prior authorized bonds into one larger issuance; $199.2 million is reimbursable bonds financed from funds other than the general fund and; $35.7 million is the cost (3 percent) of issuing the bonds . The reimbursable bonds are:  $61 million for the new natural resources building on the capital campus financed by agency rental payments, trust land revenues, and parking fees. The balance of the $73 million project is general obligation bonds; $63 million for the new Labor and Industries building financed by medical aid and accident funds and; $75 million for the University of Washington to finance future projects paid from federal research grant funds.

In addition to authorizing the issuance of state bonds this legislation includes the following provisions:  1. Prior bond bills are amended to be consistent with the State Finance Committee statutes;  2. The State Finance Committee is authorized to issue bonds with "deep discounts" in which the interest and principal are payable at maturity. These type of bonds were issued in 1988 as "College Savings Bonds;"  3. Excludes bond insurance or similar type credit support for state bonds from the statutory seven percent debt limit;  4. Allows construction accounts that receive bond proceeds to have cash deficits in order to manage the cash in the various accounts to avoid arbitrage earnings prohibited by the 1986 federal tax reform.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The bond authorization for a new State Patrol headquarters was deleted, the amount for Common School Construction was increased by $10 million, and the $63 million bond authorization for the new Labor and Industries building was added.

Fiscal Note:      No Impact.

House Committee ‑ Testified For:    None Presented.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    None Presented.

House Committee - Testimony Against:      None Presented.