SENATE 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

Senate Committee on Ways & Means

Senate Hearing Date(s):March 31, 1989

Majority Report:  Do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Amondson, Bailey, Bauer, Bluechel, Cantu, Fleming, Gaspard, Hayner, Johnson, Lee, Matson, Moore, Newhouse, Niemi, Owen, Saling, Smith, Talmadge, Williams, Wojahn.

Senate Staff:Steve Jones (786-7440)

                  April 4, 1989

AS REPORTED BY COMMITTEE ON WAYS & MEANS,  MARCH 31, 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.  Discounted bonds are sold to the public at face value rather than at a premium after the underwriters add their cost of marketing the bonds.  The result makes state bonds more attractive in the bond market and, therefore, lower interest rates to the state.

SUMMARY:

The State Finance Committee may 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.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Senate Committee - Testified: Frank Hensley, LBC (pro); Doug Ekstine, State Treasurer's Office (pro)