SENATE BILL REPORT

HB 2310

BYRepresentatives H. Sommers, Schoon and Rasmussen; by request of State Treasurer

Modifying the state's ability to lease and lease back land.

House Committe on Capital Facilities & Financing

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 21, 1990

Majority Report:  Do pass.

      Signed by Senators McCaslin, Chairman; Thorsness, Vice Chairman; DeJarnatt, Patrick, Sutherland.

Senate Staff:Steve Nelsen (786-7464)

                  February 21, 1990

AS REPORTED BY COMMITTEE ON GOVERNMENTAL OPERATIONS, FEBRUARY 21, 1990

BACKGROUND:

In 1989, the Legislature authorized the state to enter into lease/purchase agreements for equipment and real estate.  Such agreements for installment payments on real estate, however, require prior approval by the Legislature.

During the implementation of the new law several technical problems surfaced.  Two require statutory changes.  First, Washington law does not exempt public property acquired by lease/purchase or installment contacts from taxation.  Similar property acquired by outright purchase is, however, exempt from state property tax.  Second, the state cannot lease property acquired under a lease/purchase agreement that resides on state owned land.  For example, if the state constructed a building on state land, the state could not lease the building to an outside party until installment payments were completed.  The lease/purchase program currently finances such building contracts with certificates of participation, in which private investors provide initial capital to finance the building.

The State Treasurer's office recommends that the current law be amended to enable the state to lease financed buildings to a third party.  This would reduce the risk to investors who provide initial capital to finance the building.

SUMMARY:

The Department of General Administration is authorized to negotiate leases on public lands if the property on the land is to be acquired by a financing contract.  The lessor is authorized to hold a security interest in property acquired by a financing contract.  All property owned by the state, including property under a financing contract is exempt from taxation.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Senate Committee - Testified: Tim Kerr, State Treasurer's office (pro)