S-722                 _______________________________________________

                                                   SENATE BILL NO. 5205

                        _______________________________________________

State of Washington                               51st Legislature                              1989 Regular Session

By Senators Anderson, McMullen, Lee, Smitherman and Barr

Read first time 1/18/89 and referred to Committee on Economic Development & Labor.

AN ACT Relating to a linked deposit program for investment by the state; and adding new sections to chapter 43.84 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1.     The legislature finds that many communities throughout the state are experiencing economic stagnation or decline.  The unemployment and underemployment in these distressed areas threaten the safety, health, and welfare of residents of these areas, decreasing the value of private investment  and jeopardizing the sources of public revenue.  The revitalization of distressed areas requires the development of new business ventures and the stimulation of private investment.  It is the intent of the legislature to provide capital to promote economic development and job creation in distressed areas by authorizing the state treasurer to operate a program which links state deposits to business loans by financial institutions.

NEW SECTION. Sec. 2.     (1) The state treasurer shall establish a linked deposit program for investments in certificates of deposit in Washington financial institutions.  As a condition of participating in the program, financial institutions must make qualifying loans as provided in section 3 of this act.  Each certificate of deposit purchased by the state treasurer shall be equal to the amount of the qualifying loan made by the financial institution.  The state treasurer is authorized to set interest rates on certificates and on qualifying loans consistent with the intent of sections 1 through 4 of this act and sound financial practices.

          (2)  Qualifying loans under the linked deposit program are those which:

          (a) Are made in distressed areas as defined in RCW 43.165.010;

          (b) Are made to a small business with a majority of employees in the state; and

          (c) Are consistent with other criteria set by the state treasurer.

          (3) The state treasurer may reject any specific loan.

          (4) In setting interest rates on certificates and loans, the state treasurer shall vary the rates so that preference in lending will be given to businesses that are engaged in manufacturing, export, or providing services for sale outside the state or that have innovative products or production processes.  The treasurer may also vary the length of the terms of deposit.

NEW SECTION. Sec. 3.     The state and those acting as its agents are not liable in any manner for payment of the principal or interest on qualifying loans under the linked deposit program.  Any delay in payments or default on the part of the borrower does not in any manner affect the deposit agreement between the financial institution and the state treasurer.

NEW SECTION. Sec. 4.     The state treasurer may use up to two hundred million dollars per year of state funds for the linked deposit program.

NEW SECTION. Sec. 5.     If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 6.     Sections 1 through 4 of this act are each added to chapter 43.84 RCW.