SENATE BILL REPORT
SB 5339
BYSenators Lee, Anderson, Smitherman, Johnson, McMullen, Bluechel, Sellar, Barr, Williams, Fleming and Sutherland; by request of Governor
Creating the Washington economic development finance authority.
Senate Committee on Economic Development & Labor
Senate Hearing Date(s):February 3, 1989; February 9, 1989
Majority Report: That Substitute Senate Bill No. 5339 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.
Signed by Senators Lee, Chairman; Anderson, Vice Chairman; McDonald, McMullen, Murray, Saling, Smitherman, West, Williams.
Senate Staff:Jack Brummel (786-7428)
February 10, 1989
Senate Committee on Ways & Means
Senate Hearing Date(s):February 22, 1989; February 27, 1989
Majority Report: That Second Substitute Senate Bill No. 5339 be substituted therefor, and the second substitute bill do pass.
Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bailey, Bauer, Bluechel, Cantu, Gaspard, Hayner, Johnson, Lee, Niemi, Owen, Saling, Talmadge, Warnke, Williams, Wojahn.
Senate Staff:Bill Bafus (786-7715)
February 28, 1989
AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 27, 1989
BACKGROUND:
Small businesses play an important role in job generation and innovation. They are recognized as key in our efforts to both remain competitive in world markets, and to revitalize communities whose economics have undergone structural changes in the last decade. Small business growth is viewed by many as the premier mechanism for strengthening and diversifying the state's economic base. The availability of capital is key to the ability of firms to meet their full potential for economic growth. Yet many small businesses complain that they cannot obtain the capital they need for success.
Article 8, Section 5 of the Washington State Constitution, often called the lending of credit clause, prohibits the use of state funds to directly aid businesses unless there is an obligation on the part of the business which corresponds to the benefit received. The state Supreme Court held in 1985 that publicly issued nonrecourse bonds, those backed by income from the project funded with the bonds rather than by the taxing power of the state, did not violate the lending of credit clause even when the project is not publicly owned. The state has several mechanisms currently for financing non-publicly owned projects through nonrecourse bonds. These include the Washington Health Care Facilities Authority, the Housing Finance Commission, and the Washington Higher Education Facilities Authority.
The state's Economic Development Board, in its final report, recommended the creation of a Washington Development Finance Authority to facilitate access to capital markets by businesses and communities not otherwise served by the private sector.
SUMMARY:
The Washington Economic Development Finance Authority (WEDFA) is established as a public body to help small and medium sized businesses meet their capital needs. The WEDFA is administered by a seven member board, one member each from the Department of Trade and Economic Development and the Department of Community Development, the five members from the general public appointed by the Governor. The Department of Trade and Economic Development and the Department of Community Development will provide the staff for the WEDFA.
The WEDFA is authorized: (1) to develop programs to fund export transactions for small businesses that cannot get commercial loans from private lenders; (2) to provide financing to farmers relying on subsidies from the federal government as collateral; (3) to pool loans guaranteed by the federal Small Business Administration (SBA) or Farm Home Administration (FmHA); and (4) to access federal development finance programs. The WEDFA is required to develop a plan outlining economic development goals and defining strategies to accomplish the goals. The authority is required to hold at least one public hearing regarding its plan.
The WEDFA may not lend state credit, issue bills of credit, take deposits, or finance housing, health care facilities, or educational facilities that are financed through other statutory commissions or authorities. The WEDFA is authorized to issue nonrecourse bonds. These bonds are not obligations of the state.
The statutory list of executive state officers includes members of the WEDFA. Financial and commercial information provided to the WEDFA by businesses are exempt from public disclosure.
EFFECT OF PROPOSED SUBSTITUTE:
The State Treasurer, four legislators, and two members of the public are added as board members bringing the membership total to 14. A one-year term is established for the chair of the authority. The exemption of the chair from removal by the Governor is stricken.
EFFECT OF PROPOSED SECOND SUBSTITUTE:
Support services performed for the Authority by other state agencies are reimbursable by the Authority unless separately provided for in the budget. The State Auditor shall review the Authority by January 1, 1992 and January 1, 1994 and provide an analysis of its success in fostering new employment, the additional revenue generated by its financing assistance, the additional costs to the state, and other aspects of its performance.
Appropriation: none
Revenue: yes
Fiscal Note: available
Appointments by Legislature Required: Two members of the Senate, one from each caucus; two members of the House of Representatives, one from each caucus
Senate Committee - Testified: ECONOMIC DEVELOPMENT & LABOR: FOR: John Anderson and David Dougherty, DTED; Kent Hull, Hulpak; Rod Bristol, Sudden Printing; Lee Fisher, Export Assistance Center; Collin Sprague, AWB
Senate Committee - Testified: WAYS & MEANS: John Anderson, DTED (for); David Daugherty, DTED (for); Jay Reich, Preston, Thorgrimson, Ellis & Holman; Bob Campbell, Shearson, Lehman & Hutton (for); John Harter, Washington State Association of Wheat Growers (for); Mike Fitzgerald, Washington State Economic Development Board (for); Gail McElroy, Washington Bankers Association (for)