AN
ACT Relating to the Washington state school district credit enhancement
program; amending RCW 39.42.060; adding a new chapter to Title 39 RCW; and
providing a contingent effective date.
BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF WASHINGTON:
NEW
SECTION. Sec. 1. The
legislature finds that implementation of the credit enhancement program
provided for in this chapter can provide substantial savings to the taxpayers
of the state of Washington with minimal cost or risk to the state government.
The guaranty provided by pledging the credit of the state to the payment of
voter-approved school district general obligation bonds will encourage lower
interest rates, and therefore lower taxes, for such bonds than school districts
alone can command, despite the excellent credit history of such obligations.
Any such guarantee does not remove the debt obligation of the school district
and is not state debt.
NEW
SECTION. Sec. 2. The
definitions in this section apply throughout this chapter unless the context
clearly requires otherwise.
(1)
"Bond" means any voted general obligation bond issued by a school
district, holding a certificate issued pursuant to this chapter for such a
bond.
(2)
"Credit enhancement program" means the school district bond guaranty
established by this chapter.
(3)
"General obligation bond" means any bond, note, warrant, certificate
of indebtedness, or other obligation of a district that constitutes an
indebtedness within the meaning of any applicable constitutional or statutory
debt limitations.
(4)
"Paying agent" means the paying agent selected, from time to time,
for a bond issue pursuant to state law.
(5)
"Refunding bond" means any general obligation bond issued by a
district for the purpose of refunding its outstanding general obligation bonds.
(6)
"School district" or "district" means any school district
existing now or later under the laws of the state.
NEW
SECTION. Sec. 3.
(1)(a) The full faith, credit, and taxing power of the state is pledged to
guarantee full and timely payment of the principal of and interest on bonds as
such payments become due. However, in the event of any acceleration of the due
date of the principal by reason of mandatory redemption or acceleration
resulting from default, the payments guaranteed shall be made in the amounts
and at the times as payments of principal would have been due had there not been
any acceleration.
(b)
This guaranty does not extend to the payment of any redemption premium.
(c)
Reference to this chapter by its title on the face of any bond conclusively
establishes the guaranty provided to that bond under the provisions of this chapter.
(2)(a)
The state pledges to and agrees with the owners of any bonds that the state
will not alter, impair, or limit the rights vested by the credit enhancement
program with respect to the bonds until the bonds, together with applicable
interest, are fully paid and discharged. However, this chapter does not
preclude an alteration, impairment, or limitation if full provision is made by
law for the payment of the bonds.
(b)
Each district may refer to this pledge and undertaking by the state in its bonds.
(3)
Only validly issued bonds issued after the effective date of this section may
be guaranteed under this chapter.
NEW
SECTION. Sec. 4.
(1)(a) Any district, by resolution of its board of directors, may request that
the state treasurer issue a certificate evidencing the state's guaranty, under
this chapter, of its bonds.
(b)
After reviewing the request, if the state treasurer determines that the
district is eligible under rules adopted by the state finance committee, the
state treasurer shall promptly issue the certificate as to specific bonds of
the district and provide it to the requesting district.
(c)(i)
The district receiving the certificate and all other persons may rely on the
certificate as evidencing the guaranty for bonds issued within one year from
and after the date of the certificate, without making further inquiry during
that year.
(ii)
The certificate of eligibility is valid for one year even if the state
treasurer later determines that the school district is ineligible.
(2)
Any district that chooses to forego the benefits of the guaranty provided by
this chapter for a particular issue of bonds may do so by not referring to this
chapter on the face of its bonds.
(3)
Any district that has bonds, the principal of or interest on which has been
paid, in whole or in part, by the state under this chapter, may not issue any
additional bonds guaranteed by this chapter until:
(a)
All payment obligations of the district to the state under the credit
enhancement program are satisfied; and
(b)
The state treasurer and the state superintendent of public instruction each
certify in writing, to be kept on file by the state treasurer and the state
superintendent of public instruction, that the district is fiscally solvent.
(4)
The state finance committee may establish by rule fees sufficient to cover the
costs of administering this chapter.
NEW
SECTION. Sec. 5.
(1)(a) The county treasurer for each district with outstanding, unpaid bonds
shall transfer money sufficient for each scheduled debt service payment to its
paying agent on or before any principal or interest payment date for the bonds.
(b)
A county treasurer who is unable to transfer a scheduled debt service payment
to the paying agent on the transfer date shall immediately notify the paying
agent and the state treasurer by:
(i)
Telephone;
(ii)
A writing sent by facsimile or electronic transmission; and
(iii)
A writing sent by first class United States mail.
(2)
If sufficient funds are not transferred to the paying agent as required by
subsection (1) of this section, the paying agent shall immediately notify the
state treasurer of that failure by:
(a)
Telephone;
(b)
A writing sent by facsimile or electronic transmission; and
(c)
A writing sent by first class United States mail.
(3)(a)
If sufficient money to pay the scheduled debt service payment have not been so
transferred to the paying agent, the state treasurer shall, forthwith, transfer
sufficient money to the paying agent to make the scheduled debt service
payment.
(b)
The payment by the state treasurer:
(i)
Discharges the obligation of the issuing district to its bond owners for the
payment, but does not retire any bond that has matured. The terms of that bond
remain in effect until the state is repaid; and
(ii)
Transfers the rights represented by the general obligation of the district from
the bond owners to the state.
(c)
The district shall repay to the state the money so transferred as provided in
this chapter.
NEW
SECTION. Sec. 6. (1)
Any district that has issued bonds for which the state has made all or part of
a debt service payment shall:
(a)
Reimburse all money drawn by the state treasurer on its behalf;
(b)
Pay interest to the state on all money paid by the state from the date that
money was drawn to the date the state is repaid at a rate to be prescribed by
rule by the state finance committee; and
(c)
Pay all penalties required by this chapter.
(2)(a)
The state treasurer shall establish the reimbursement interest rate after
considering the circumstances of any prior draws by the district on the state,
market interest and penalty rates, and the cost of funds or opportunity cost of
investments, if any, that were required to be borrowed or liquidated by the
state to make payment on the bonds.
(b)
The state treasurer may, after considering the circumstances giving rise to the
failure of the district to make payment on its bonds in a timely manner, impose
on the district a penalty of not more than five percent of the amount paid by
the state pursuant to its guaranty for each instance in which a payment by the
state is made.
(3)(a)(i)
If the state treasurer determines that amounts obtained under this chapter will
not reimburse the state in full within one year from the state's payment of a
district's scheduled debt service payment, the state treasurer may pursue any
legal action, including mandamus, against the district to compel it to meet its
repayment obligations to the state.
(ii)
In pursuing its rights under (a)(i) of this subsection, the state shall have
the same substantive and procedural rights as would a holder of the bonds of a
district. If and to the extent that the state has made payments to the holders
of bonds of a district under section 5 of this act and has not been reimbursed
by the district, the state shall be subrogated to the rights of those bond
holders.
(iii)
The state treasurer may also direct the district and the appropriate county
officials to restructure and revise the collection of taxes for the payment of
bonds on which the state treasurer has made payments under this chapter and, to
the extent permitted by law, may require that the proceeds of such taxes be
applied to the district's obligations to the state if all outstanding
obligations of the school district payable from such taxes are fully paid or
their payment is fully provided for.
(b)
The district shall pay the fees, expenses, and costs incurred by the state in
recovering amounts paid under the guaranty authorized by this chapter.
NEW
SECTION. Sec. 7. In
order to effect the provisions of Article VIII, section 1(e) of the state
Constitution, Senate Joint Resolution No. 8206, the legislature shall make
provision for such amounts as may be required to make timely payments under the
state school district credit enhancement program under this chapter in each and
every biennial appropriations act.
NEW
SECTION. Sec. 8. The
state finance committee may adopt, under chapter 34.05 RCW, all rules necessary
and appropriate for the implementation and administration of this chapter.
Sec.
9. RCW
39.42.060 and 1997 c 220 s 220 (Referendum Bill No. 48) are each amended to
read as follows:
No
bonds, notes, or other evidences of indebtedness for borrowed money shall be
issued by the state which will cause the aggregate debt contracted by the state
to exceed that amount for which payments of principal and interest in any
fiscal year would require the state to expend more than seven percent of the
arithmetic mean of its general state revenues, as defined in section 1(c) of
Article VIII of the Washington state Constitution for the three immediately
preceding fiscal years as certified by the treasurer in accordance with RCW
39.42.070. It shall be the duty of the state finance committee to compute
annually the amount required to pay principal of and interest on outstanding
debt. In making such computation, the state finance committee shall include
all borrowed money represented by bonds, notes, or other evidences of
indebtedness which are secured by the full faith and credit of the state or are
required to be paid, directly or indirectly, from general state revenues and
which are incurred by the state, any department, authority, public corporation
or quasi public corporation of the state, any state university or college, or
any other public agency created by the state but not by counties, cities,
towns, school districts, or other municipal corporations, and shall include
debt incurred pursuant to section 3 of Article VIII of the Washington state
Constitution, but shall exclude the following:
(1)
Obligations for the payment of current expenses of state government;
(2)
Indebtedness incurred pursuant to RCW 39.42.080 or 39.42.090;
(3)
Principal of and interest on bond anticipation notes;
(4)
Any indebtedness which has been refunded;
(5)
Financing contracts entered into under chapter 39.94 RCW;
(6)
Indebtedness authorized or incurred before July 1, 1993, pursuant to statute
which requires that the state treasury be reimbursed, in the amount of the
principal of and the interest on such indebtedness, from money other than
general state revenues or from the special excise tax imposed pursuant to
chapter 67.40 RCW;
(7)
Indebtedness authorized and incurred after July 1, 1993, pursuant to statute
that requires that the state treasury be reimbursed, in the amount of the
principal of and the interest on such indebtedness, from (a) moneys outside the
state treasury, except higher education operating fees, (b) higher education
building fees, (c) indirect costs recovered from federal grants and contracts,
and (d) fees and charges associated with hospitals operated or managed by
institutions of higher education;
(8)
Any agreement, promissory note, or other instrument entered into by the state
finance committee under RCW 39.42.030 in connection with its acquisition of
bond insurance, letters of credit, or other credit support instruments for the
purpose of guaranteeing the payment or enhancing the marketability, or both, of
any state bonds, notes, or other evidence of indebtedness; ((and))
(9)
Indebtedness incurred for the purposes identified in RCW 43.99N.020; and
(10)
Indebtedness incurred for the purposes of the school district bond guaranty
established by chapter 39.-- RCW (sections 1 through 8 of this act).
To
the extent necessary because of the constitutional or statutory debt
limitation, priorities with respect to the issuance or guaranteeing of bonds,
notes, or other evidences of indebtedness by the state shall be determined by
the state finance committee.
NEW
SECTION. Sec. 10. This
act takes effect January 1, 2000, if the proposed amendment to Article VIII,
section 1 of the state Constitution, guaranteeing the general obligation debt
of school districts, is validly submitted to and is approved and ratified by
the voters at the next general election. If the proposed amendment is not approved
and ratified, this act is void in its entirety.
NEW SECTION. Sec. 11.
Sections 1 through 8 of this act constitute a new chapter in Title 39 RCW.
