HOUSE BILL REPORT

SSB 5520

As Amended by the House

BYSenate Committee on Governmental Operations (originally sponsored by Senators Halsan and McCaslin)

Limiting improvements financed by improvement districts to two hundred percent of the amount originally proposed at the time the district was created.

House Committe on Local Government

Majority Report:  Do pass with amendments.  (10)

      Signed by Representative Haugen, Chair; Cooper, Vice Chair; Beck, Madsen, Nealey, Nelson, Nutley, Rayburn, L. Smith and Zellinsky.

Minority Report:  Do not pass.  (3)

      Signed by Representatives Bumgarner, Ferguson and Hine.

House Staff:Steve Lundin (786-7127)

AS PASSED HOUSE APRIL 14, 1987

BACKGROUND:

Local improvement districts (LID's) are mechanisms used by government to finance all or part of the costs of public improvements where those public improvements specifically benefit, or increase the value of, real property located in the vicinity of the improvement.

Special assessments are imposed on real property within the LID to finance those portions of the costs that will be financed by the LID.  If the special assessments are not paid during a 30-day payment period, LID bonds are issued to obtain the needed funds, and those property owners who did not pay their special assessments pay installments to retire the LID bonds.

Legislation was enacted in 1985 that allowed local governments to establish a reserve fund to secure a specific LID bond issue that is in addition to a guaranty fund used to secure any LID bond issues of the local government.

SUMMARY:

If a reserve fund is created to secure payment of an local improvement district (LID) bond issue, the local government is required to credit each property owner's proportionate share of money assessed to create the reserve fund, plus accrued interest, to reduce the property owner's nondelinquent assessment or installment payments. Each payment of a non-delinquent assessment or non-delinquent installment will be reduced by the amount of credit.  Any balance in a reserve fund remaining after retirement of the bonds will be transferred to the local government's guaranty fund.

A municipality that had established such a reserve fund prior to the effect date of this act, which did not credit or reimburse money remaining in the reserve fund to the owners of property subject to the assessments, shall transfer any money remaining in the reserve fund, after retirement of the LID bonds, to the owners of property subject to the assessments if the assessments on the property were not delinquent at the time of the transfer or if the lien for the delinquent assessments had not been foreclosed.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Mark Triplett, Homebuilders Association.

House Committee - Testified Against:      George Mack, Roberts & Shefelman; and Celia Strong, City of Everett.

House Committee - Testimony For:    Local governments should not get a windfall from reserve funds, but the property owners should receive the benefits.  Under the existing law the whole unused portion of a reserve fund can revert to the local government after the bonds are retired.  This is unfair.  Only non-delinquent payments receive the benefits.

House Committee - Testimony Against:      It will be too difficult to calculate the amount of interest earnings.  Arbitrage problems could result.  People who are delinquent should get benefits of this type of credit since many delinquencies are inadvertent.