BILL REQ. #:  Z-0431.2 

Read first time 01/19/2007.   Referred to Committee on Higher Education.

     AN ACT Relating to authorizing the Washington higher education facilities authority to originate and purchase educational loans and to issue student loan revenue bonds; amending RCW 28B.07.030; adding new sections to chapter 28B.07 RCW; creating new sections; and declaring an emergency.

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

NEW SECTION.  Sec. 1   LEGISLATIVE DECLARATION. It is the public policy of the state and a recognized governmental function to facilitate student loan financing and thereby increase access to higher education for Washington's citizens. The purpose of this act is to bring to the citizens of the state the applicable advantages of federal tax law and federal loan guaranties and to authorize the Washington higher education facilities authority to originate and acquire educational loans and to issue nonrecourse revenue bonds to be paid from such loans.

NEW SECTION.  Sec. 2   A new section is added to chapter 28B.07 RCW to read as follows:
     DEFINITIONS. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Authority" means the Washington higher education facilities authority established pursuant to RCW 28B.07.030 or any board, body, commission, department, or officer succeeding to the principal functions of the authority or to whom the powers conferred upon the authority shall be given by law.
     (2) "Educational loans" means:
     (a) Guaranteed federal educational loans made in accordance with Title IV, Part B, of the higher education act of 1965, or its successor, to a qualified borrower for payment of educational expenses incurred by a student while attending a participating institution, the payment of principal of and interest on which is insured by the United States secretary of education under the higher education act of 1965, or its successor; and
     (b) Alternative state educational loans made in accordance with this act to a qualified borrower as determined by the authority for payment of educational expenses incurred by a student while attending a participating institution under the terms and conditions determined by the authority.
     (3) "Obligation," "bond," or "bonds" means bonds, notes, commercial paper, certificates of indebtedness, or other evidences of indebtedness of the authority issued under this act, whether or not the interest on the obligation is subject to federal income taxation.
     (4) "Participating institution" means any post high school educational institution, public or private, whose students are eligible for educational loans.
     (5) "Qualified borrower" means a student, or the parent of a student, who: (a) Qualifies for an educational loan; and (b) is a resident of the state of Washington or has been accepted for enrollment at or is attending a participating institution within the state of Washington.

NEW SECTION.  Sec. 3   A new section is added to chapter 28B.07 RCW to read as follows:
     STUDENT LOAN AUTHORITY. (1) In addition to its existing powers, the authority has the following powers with respect to student loan financing:
     (a) To originate and purchase educational loans;
     (b) To issue revenue bonds payable from and secured by educational loans;
     (c) To execute financing documents in connection with such educational loans and bonds;
     (d) To adopt rules in accordance with chapter 34.05 RCW;
     (e) To participate fully in federal programs that provide guaranties for the repayment of educational loans and do all things necessary, useful, or convenient to make such programs available in the state and carry out the purposes of this act;
     (f) To contract with an agency, financial institution, or corporation, whether organized under the laws of this state or otherwise, whereby such agency, financial institution, or corporation shall provide billing, accounting, reporting, or administrative services required for educational loan programs administered by the authority or in which the authority participates; and
     (g) To form one or more nonprofit special purpose corporations for accomplishing the purposes set forth in this act. The authority may contract with any such nonprofit corporation, as set forth in (f) of this subsection.
     (2) In the exercise of any of these powers, the authority shall incur no expense or liability that shall be an obligation, either general or special, of the state, and shall pay no expense or liability from funds other than funds of the authority. Funds of the state may not be used for such purpose unless appropriated for such purpose.

NEW SECTION.  Sec. 4   A new section is added to chapter 28B.07 RCW to read as follows:
     ALTERNATIVE STATE EDUCATIONAL LOANS. The authority, in addition to administering federal loan programs, may administer an alternative state educational loan program that may include the purchase or origination of alternative state educational loans with terms as determined by the authority. These loans are not guaranteed by the state and the proceeds from loan repayment including interest or other loan-related payments or authority or contractor revenue may be used by the authority to make any required payments to bondholders.

NEW SECTION.  Sec. 5   A new section is added to chapter 28B.07 RCW to read as follows:
     REVENUE BONDS. (1) The authority may, from time to time, issue revenue bonds in order to carry out the purposes of this act.
     (2) The bonds shall be issued pursuant to a bond resolution or trust indenture and shall be payable solely out of the special fund or funds created by the authority in the bond resolution or trust indenture. Any security interest created against the unexpended bond proceeds and against the special funds created by the authority shall be immediately valid and binding against the moneys and any securities in which the moneys may be invested without authority or trustee possession, and the security interest shall be prior to any party having any competing claim against the moneys or securities, without filing or recording under Article 62A.9A of the uniform commercial code, and regardless of whether the party has notice of the security interest.
     (3) The obligations shall be payable from and secured by a pledge of revenues derived from or by reason of ownership of guaranteed educational loans and investment income, after deduction of expenses of operating the authority's program.
     (4) The bonds may be issued as serial bonds or as term bonds or any such combination. The bonds shall bear such date or dates; mature at such time or times; bear interest at such rate or rates, either fixed or variable; be payable at such time or times; be in such denominations; be in such form; carry such registration privileges; be made transferable, exchangeable, and interchangeable; be payable in lawful money of the United States of America at such place or places; be subject to such terms of redemption; and be sold at public or private sale, in such manner, at such time, and at such price as the authority shall determine. The bonds shall be executed by the manual or facsimile signatures of the chairperson and the authority's duly elected secretary or its executive director, and by the trustee if the authority determines to use a trustee. At least one signature shall be manually subscribed.
     (5) Any bond resolution, trust indenture, or other financing document may contain provisions, which may be made a part of the contract with the holders or owners of the bonds to be issued, pertaining to the following, among other matters: (a) The security interests granted to the holders or owners of the bonds to secure repayment of the bonds; (b) the segregation of reserves or sinking funds, and the regulation, investment, and disposition thereof; (c) limitations on the purposes to which, or the investments in which, the proceeds of the sale of any issue of bonds may be applied; (d) terms pertaining to the issuance of additional parity bonds; (e) the refunding of outstanding bonds; (f) procedures, if any, by which the terms of any contract with bondholders may be amended or abrogated; (g) events of default as well as rights and remedies in the event of a default including without limitation the right to declare all principal and interest immediately due and payable; (h) terms governing performance by the trustee of its obligation; or (i) such other additional covenants, agreements, and provisions as are deemed necessary, useful, or convenient by the authority for the security of the holders of the bonds.
     (6) All bonds and any interest coupons appertaining to the bonds shall be negotiable instruments under Title 62A RCW.
     (7) Neither the members of the authority, nor its employees or agents, nor any person executing the bonds shall be liable personally on the bonds or be subject to any personal liability or accountability by reason of the issuance of the bonds.
     (8) The authority may purchase its bonds with any of its funds available for the purchase. The authority may hold, pledge, cancel, or resell the bonds subject to and in accordance with agreements with bondholders.
     (9) Bonds issued under this act shall not be deemed to constitute obligations, either general or special, of the state or of any political subdivision of the state, or a pledge of the faith and credit of the state or of any political subdivision, or a general obligation of the authority. The bonds shall be special obligations of the authority and shall be payable solely from the special fund or funds created by the authority in the bond resolution or trust indenture pursuant to which the bonds were issued. The issuance of bonds under this act shall not obligate, directly, indirectly, or contingently, the state or any political subdivision of the state to levy any taxes or appropriate or expend any funds for the payment of the principal or the interest on the bonds.
     (10) Neither the proceeds of bonds issued under this act, any moneys used or to be used to pay the principal of or interest on the bonds, nor any moneys received by the authority to defray its administrative costs shall constitute public money or property. All of such moneys shall be kept segregated and set apart from funds of the state and any political subdivision of the state and shall not be subject to appropriation or allotment by the state or subject to the provisions of chapter 43.88 RCW.

NEW SECTION.  Sec. 6   A new section is added to chapter 28B.07 RCW to read as follows:
     REVENUE REFUNDING BONDS. Bonds may be issued by the authority to refund other outstanding bonds issued pursuant to this act, at or prior to the maturity thereof, and to pay any redemption premium with respect thereto. Bonds issued for such refunding purposes may be combined with bonds issued for the origination or purchase of educational loans. Pending the application of the proceeds of the refunding bonds to the redemption of the bonds to be redeemed, the authority may enter into an agreement or agreements with a corporate trustee with respect to the interim investment of the proceeds and the application of the proceeds and the earnings on the proceeds to the payment of the principal of and interest on, and the redemption of the bonds to be redeemed.

NEW SECTION.  Sec. 7   A new section is added to chapter 28B.07 RCW to read as follows:
     TRUST AGREEMENTS. All moneys received by or on behalf of the authority under this chapter, whether as proceeds from the sale of bonds or from other sources shall be deemed to be trust funds to be held and applied solely as provided in this chapter. The authority, in lieu of receiving and applying the moneys itself, may enter into an agreement or trust indenture with one or more banks or trust companies having the power and authority to conduct trust business in the state to:
     (1) Perform all or any part of the obligations of the authority with respect to: (a) Bonds issued by it; (b) the receipt, investment, and application of the proceeds of the bonds and moneys available for the payment of the bonds; and (c) other matters relating to the exercise of the authority's powers under this chapter;
     (2) Receive, hold, preserve, and enforce any security interest or evidence of security interest granted by a participant for purposes of securing the payment of the bonds; and
     (3) Act on behalf of the authority or the holders or owners of bonds of the authority for purposes of assuring or enforcing the payment of the bonds, when due.

NEW SECTION.  Sec. 8   A new section is added to chapter 28B.07 RCW to read as follows:
     PROCEEDS FUNDS. (1) All proceeds derived from a particular bond under the provisions of this act shall be deposited in a fund to be known as the proceeds fund, which shall be maintained in such bank or banks as shall be determined by the authority. Proceeds deposited in the fund shall be expended only on approval of the authority.
     (2) A separate proceeds fund shall be maintained for each series of bonds issued by the authority.
     (3) Funds credited to a proceeds fund may be used for any or all of the following purposes:
     (a) The payment of the necessary expenses, including, without limitation, the costs of issuing the authority's bonds, incurred by the authority in carrying out its responsibilities under sections 2 through 13 of this act and RCW 28B.07.030;
     (b) The establishment of a debt service reserve account to secure the payment of bonds;
     (c) The making of educational loans to qualified borrowers;
     (d) The purchase, either directly or acting through a bank with trust powers for its account, of educational loans; and
     (e) The acquisition of an investment contract or contracts or any other investments permitted under an indenture of the authority securing its bonds. The income from the contract, contracts, or investments, after payment of the bonds and all expenses associated therewith, shall be used by the authority to assist in carrying out its purposes under this act.

NEW SECTION.  Sec. 9   A new section is added to chapter 28B.07 RCW to read as follows:
     DEFAULT. The proceedings authorizing any revenue obligations under this act or any financing document securing the revenue bonds may provide that if there is a default in the payment of the principal of or the interest on the bonds or in the performance of any agreement contained in the proceedings or financing document, the payment and performance may be enforced by mandamus or by the appointment of a receiver in equity with power to collect revenues in accordance with the proceedings or provisions of the financing document.

NEW SECTION.  Sec. 10   A new section is added to chapter 28B.07 RCW to read as follows:
     CONFLICT WITH FEDERAL REQUIREMENTS. If any part of this act is found to be in conflict with federal requirements under the higher education act of 1965, the conflicting part of this act is hereby declared to be inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and such finding or determination shall not affect the operation of the remainder of this act in its application to the agencies concerned. The rules under this act shall meet federal requirements that are a necessary condition for participation of a state agency under the higher education act of 1965, or its successor.

NEW SECTION.  Sec. 11   A new section is added to chapter 28B.07 RCW to read as follows:
     EXCLUDED FROM DEBT LIMITATION. Bonds issued by the authority under this chapter shall not be subject to the debt limitation set forth in RCW 28B.07.050(9).

NEW SECTION.  Sec. 12   A new section is added to chapter 28B.07 RCW to read as follows:
     SALE OF ASSETS. The authority is authorized to offer for sale from time to time loan portfolios or other assets accumulated by the authority. Sales shall be conducted in a competitive manner and shall be approved by the authority board.

NEW SECTION.  Sec. 13   A new section is added to chapter 28B.07 RCW to read as follows:
     CHAPTER SUPPLEMENTAL. This chapter shall be regarded as supplemental and additional to the powers conferred on the authority by other laws. The issuance of bonds and refunding bonds under this chapter need not comply with requirements of any other laws applicable to the issuance of bonds.

Sec. 14   RCW 28B.07.030 and 1985 c 370 s 48 are each amended to read as follows:
     (1) The Washington higher education facilities authority is hereby established as a public body corporate and politic, with perpetual corporate succession, constituting an agency of the state of Washington exercising essential governmental functions. The authority is a "public body" within the meaning of RCW 39.53.010.
     (2) The authority shall consist of seven members as follows: The governor, lieutenant governor, executive director of the higher education coordinating board, and four public members, one of whom shall be the president of a higher education institution at the time of appointment. The public members shall be residents of the state and appointed by the governor, subject to confirmation by the senate, on the basis of their interest or expertise in the provision of higher education and the financing of higher education. The public members of the authority shall serve for terms of four years. The initial terms of the public members shall be staggered in a manner determined by the governor. In the event of a vacancy on the authority due to death, resignation, or removal of one of the public members, and upon the expiration of the term of any public member, the governor shall appoint a successor for a term expiring on the fourth anniversary of the successor's date of the appointment. If any of the state offices are abolished, the resulting vacancy on the authority shall be filled by the state officer who shall succeed substantially to the power and duties of the abolished office. Any public member of the authority may be removed by the governor for misfeasance, malfeasance, wilful neglect of duty, or any other cause after notice and a public hearing, unless such notice and hearing shall be expressly waived in writing.
     (3) The governor shall serve as chairperson of the authority. The authority shall elect annually one of its members as secretary. If the governor shall be absent from a meeting of the authority, the secretary shall preside. However, the governor may designate an employee of the governor's office to act on the governor's behalf in all other respects during the absence of the governor at any meeting of the authority. If the designation is in writing and is presented to the person presiding at the meetings of the authority who is included in the designation, the vote of the designee has the same effect as if cast by the governor.
     (4) Any person designated by resolution of the authority shall keep a record of the proceedings of the authority and shall be the custodian of all books, documents, and papers filed with the authority, the minute book or a journal of the authority, and the authority's official seal, if any. The person may cause copies to be made of all minutes and other records and documents of the authority, and may give certificates to the effect that such copies are true copies. All persons dealing with the authority may rely upon the certificates.
     (5) Four members of the authority constitute a quorum. Members participating in a meeting through the use of any means of communication by which all members participating can hear each other during the meeting shall be deemed to be present in person at the meeting for all purposes. The authority may act on the basis of a motion except when authorizing the issuance and sale of bonds, in which case the authority shall act by resolution. Bond resolutions and other resolutions shall be adopted upon the affirmative vote of four members of the authority, and shall be signed by those members voting yes. Motions shall be adopted upon the affirmative vote of a majority of a quorum of members present at any meeting of the authority. All actions taken by the authority shall take effect immediately without need for publication or other public notice. A vacancy in the membership of the authority does not impair the power of the authority to act under this chapter.
     (6) The members of the authority shall be compensated in accordance with RCW 43.03.240 and shall be entitled to reimbursement, solely from the funds of the authority, for travel expenses as determined by the authority incurred in the discharge of their duties under this chapter.

NEW SECTION.  Sec. 15   LIBERAL CONSTRUCTION. This act, being necessary for the welfare of the state and its inhabitants, shall be liberally construed to effect the purposes thereof.

NEW SECTION.  Sec. 16   CAPTIONS. Captions used in this act are not any part of the law.

NEW SECTION.  Sec. 17   SEVERABILITY. 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. 18   EMERGENCY. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.