BP BHEAD INT H [atlas:bill]

AN ACT Relating to alternative financing mechanisms for regional transit authorities; adding new sections to chapter 81.112 RCW; and creating a new section.

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

NEW SECTION. Sec. 1. The legislature finds that additional funds or other benefits can be made available to Washington regional transit authorities by facilitating their entry into sale and leaseback, leaseout and leaseback, and similar transactions that provide to private parties, in consideration for the funds or other benefits obtained by the regional transit authorities, tax benefits that are not otherwise available to regional transit authorities. The legislature further finds that such transactions have been encouraged by agencies of the federal government as ways to provide additional funds for public facilities. To facilitate such transactions for regional transit authorities, the legislature has determined that while regional transit authorities may currently have the necessary statutory authority and may currently enjoy exemptions from Washington state taxes for such transactions, a clear statement of statutory authority and exemption from Washington state taxes is necessary and helpful for the parties to such transactions. In recognition of the complexity of such transactions, the legislature desires that the authority and exemptions provided by this act be subject to certain limitations and be granted for a period as specified in section 7 of this act.

NEW SECTION. Sec. 2. A new section is added to chapter 81.112 RCW to read as follows:

(1) In order to enable regional transit authorities to acquire or finance equipment or facilities, or reduce the cost of equipment or facilities or to provide additional funding to regional transit authorities for any other lawful public purpose, regional transit authorities may enter into sale and leaseback, leaseout and leaseback, and other similar transactions with respect to equipment, facilities, and other real and personal property. In connection with any such transaction, a regional transit authority may execute, as it considers appropriate and consistent with this act, contracts, agreements, notes, security agreements, conveyances, bills of sale, deeds, leases as lessee or lessor, and currency hedges, defeasance arrangements, interest rate, currency or other swap transactions, one or more payment undertaking agreements, and agreements relating to foreign and domestic currency. These agreements or instruments shall have terms, maturities, durations, provisions as to governing laws, grants of security interests, and other provisions that are approved by the board of the regional transit authority and which are consistent with this act.

(2) "Payment undertaking agreement" means one or more agreements, undertakings or arrangements pursuant to which all or a portion of the funds generated by a sale and leaseback, leaseout and leaseback, or other similar transaction are directed or paid over to a financial institution, insurance company or other entity which agrees to meet or fulfill, in consideration for such funds, some or all of the obligations of the regional transit authority, or any public corporation or other entity created under section 5 of this act, to make future rent, debt service, or purchase price installment payments in connection with such transaction.

NEW SECTION. Sec. 3. A new section is added to chapter 81.112 RCW to read as follows:

Transactions undertaken under section 2 of this act shall be subject to the following conditions:

(1) The financial institution, insurance company, or other entity which enters into a payment undertaking agreement with the regional transit authority or public development corporation or entity created pursuant to section 5 of this act as a counterparty must have a rating from at least two nationally recognized credit rating agencies, as of the date of execution of the payment undertaking agreement, that is within the two highest long-term investment grade rating categories, without regard to subcategories, or the obligations of such counterparty must be guaranteed by a financial institution, insurance company, or other entity with such credit rating. The payment undertaking agreement shall require that the obligations of the counterparty or the guarantor, as the case may be, shall be collateralized by collateral of a type and in an amount specified by the governing body of the regional transit authority in the event that the credit ratings of the counterparty or its guarantor fall below the level required by the foregoing provisions.

(2) The amount to be paid by the counterparties under payment undertaking agreements for a transaction pursuant to the terms of such agreements, when combined with the amount of securities, deposits, and investments set aside by the regional transit authority for payment in respect of such transactions, together with interest or other earnings on such securities, deposits, or investments, shall be sufficient to pay when due all amounts required to be paid by the regional transit authority, or public corporation or entity created pursuant to section 5 of this act, as rent, debt service, or installments of purchase price, as the case may be, over the full term of the transaction plus any optional purchase price due under the transaction. A certification by an independent financial expert, banker, or certified public accountant, who is not an employee of the regional transit authority or public corporation or entity created pursuant to section 5 of this act, certifying compliance with this requirement constitutes conclusive evidence that such arrangements, by their terms, comply with the requirement under this subsection on the sufficiency of the amount.

(3) The payment undertaking agreements, and all other basic and material agreements entered into in connection with such transactions, shall specify that the parties to such agreements consent to the jurisdiction of state courts of Washington for disputes arising out of such agreements and agree not to contest venue before such courts. Regardless of the choice of law specified in the foregoing agreements, such agreements shall acknowledge that the regional transit authority or public development corporation or entity created pursuant to section 5 of this act which is a party to such agreements is an entity created under the laws of the state of Washington whose power and authority and limitations and restrictions on such power and authority are governed by the laws of the state of Washington.

Payment undertaking agreements that meet the foregoing requirement shall be treated for all relevant purposes as agreements pursuant to which future services are performed for a present payment and shall not be treated as payment agreements within the meaning of chapter 39.96 RCW.

NEW SECTION. Sec. 4. A new section is added to chapter 81.112 RCW to read as follows:

Property sold, acquired, leased, or otherwise transferred under any of the arrangements described in this act shall be considered for all purposes, including, without limitation, leasehold excise tax purposes, to be property owned, possessed, used, and held by the regional transit authority and used for public purposes, whether owned or held by the regional transit authority or by a public corporation or entity contemplated by section 5 of this act.

NEW SECTION. Sec. 5. A new section is added to chapter 81.112 RCW to read as follows:

To accomplish any of the activities under this act, a regional transit authority may create a public corporation under RCW 35.21.730 through 35.21.755 or other entity created under Washington law, which corporation or entity shall have the authority to undertake any of the activities that regional transit authorities may undertake, including any activities under this act. A regional transit authority shall have all of the powers, authorities, and rights expressly or impliedly granted to any city, town, or county, or their agents, under any provision of RCW 35.21.730 through 35.21.755.

NEW SECTION. Sec. 6. A new section is added to chapter 81.112 RCW to read as follows:

A sale, lease, sublease, or other transfer of property by or to the regional transit authority or any public corporation or entity created pursuant to section 5 of this act, and any payments or other consideration paid or received therefrom, in each case in connection with transactions undertaken under section 2 of this act, are exempt from all real estate excise, leasehold excise, sales, use, business and occupation, public utility, motor vehicle, and ad valorem real or personal property taxes, public corporation in lieu excise taxes as provided under RCW 35.21.730 and 35.21.755, and any other taxes imposed by this state or a political subdivision or municipality, city, town, county, authority, political or public corporation, or other agency of this state. The foregoing exemption is not intended to apply to taxes, if any, payable upon first acquisition or use by the regional transit authority, or any public corporation or entity created pursuant to section 5 of this act, of the equipment or facilities that is the subject of a transaction undertaken under section 2 of this act, provided, however, that other applicable exemptions may be available.

NEW SECTION. Sec. 7. A new section is added to chapter 81.112 RCW to read as follows:

(1) Except as provided in subsection (3) of this section, no regional transit authority may initiate a transaction authorized by this act after June 30, 2006.

(2) The termination of authority to enter into such transactions after June 30, 2006, shall not affect the validity of any transactions entered into under this act on or before that date or the exemptions from taxes provided by this act for such transactions.

(3) A regional transit authority may enter into a transaction in accordance with this act after June 30, 2006, to replace or refinance a transaction that relates to specific obligations entered into on or before that date and that has terminated, or is, pursuant to the terms of the replacement or refinance, to terminate, before the final stated term of that transaction. The exemptions from taxes provided by this act shall apply to such replacement or refinance transactions.

(4) Any regional transit authority, or public corporation or entity created pursuant to section 5 of this act, which undertakes a transaction authorized by this act, shall provide to the state finance committee a copy of all material agreements executed in connection with such transaction within three months of the closing of the transaction. The state finance committee shall make a report to the president of the senate and speaker of the house of representatives on transactions authorized by this act. The report shall include the amount of the transactions, the expected savings resulting from the transactions, the transaction costs, and any other information the state finance committee determines relevant. The report shall be submitted within six months of the closing of each transaction.

NEW SECTION. Sec. 8. A new section is added to chapter 81.112 RCW to read as follows:

The authority granted by this act shall be in addition and supplemental to any authority previously granted and shall not limit or be limited by any other powers or authority previously granted to regional transit authorities or any public corporation, or restrictions on such powers or authority. Nothing in this act shall be construed as limiting other statutory authority previously granted to such regional transit authorities or public corporations or other tax exemptions granted to such regional transit authorities or public corporations. Nothing in this act shall be construed as limiting the authority of the state, any political subdivision thereof, or any other public or municipal corporation to undertake the activities described herein as expressly or impliedly authorized by other provisions of law. Nothing in this act shall be construed as an authorization to provide indemnification to the extent such indemnification is prohibited or restricted by other provisions of law or the Constitution of the state of Washington.