1... Comparing the Washington Public Trust to the Washington Investment Trust
The purpose of the Washington Public Trust bill is to address various concerns raised by legislators in regards to the Washington Investment Trust bill (SB 5464/HB 2059). These concerns raised in both the House and Senate hearings in February 2017 were that the Washington Investment Trust bill is too broadly written and may raise Constitutional and other legal questions. In particular, concerns were raised about Section 1, Part 1 b which would permit the Washington Investment Trust to partner with “community based organizations and other stakeholder groups.”

Therefore the Washington Public Trust bill is much more narrowly focused on supporting public projects. The Public Trust is specifically limited to projects already financed by the State including the Washington Public Works Trust and the Washington School Construction program. Limiting the Washington Public Trust to purely public works projects should greatly reduce or eliminate any potential legal challenges or questions.

The second concern was that the Washington Investment Trust bill did not specify a definite source of capitalization. By contrast, the Washington Public Trust clearly defines two sources of capitalization. These are recycling the Public Works Trust Fund which is transferred along with all outstanding contracts to the Washington Public Trust – and the Washington School Construction Fund which is transferred along with all existing contracts to the Washington Public Trust . The Washingtin Public Trust is basically a combination of the Public Works Trust Fund and the Public School Construction Fund.

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The third concern raised by legislators was how the Washington Public Trust could avoid being continuously gutted or “swept” by the State legislature the way the Public Works Trust Fund and the School Construction Trust Fund have been gutted of over two billion dollars during the past six legislative sessions. The Washington Public Trust bill includes the creation of a five member Commission of Statewide elected officials (the governor, the lieutenant governor, the state treasurer, the superintendent of public instruction and the commissioner of public lands). The Commission in the Washington Investment Trust is also five statewide elected officiers but the officiers are different ((the governor, the lieutenant governor, the state treasurer, the auditor and the Attorney General). Because the Auditor is responsible for independently auditing the Trust, this person should not also be on the commission for the Trust they are auditing.

These five statewide elected officiers are charged with protecting urgently needed public project funds from being swept by the State legislature unless such funds could be removed from the Washington Public Trust without affecting the Trust’s ability to carry out its mission of funding public projects.

The fourth concern raised about the Washington Investment Trust was how it might possibly affect the State Debt Limit. A clear benefit of limiting the Washington Public Trust, at least initially, to public works projects and public school projects is that both of these categories of public projects are already outside of the State Debt Limit.


Why Loans From the Washington Public Trust Would Not Count Against the State Debt Limit
The GO survey includes loans from state or federal agencies in the category of “revenue debt.” These loans are exempt from being counted against statutory municipal debt limits under RCW 39.69.020. In addition, they are most often used for construction or upgrades of facilities, such as water and sewer facilities, that collecte fee revenues to pay off the debt. Examples include loans from the state Public Works Trust Fund. Because most of the Public Works Trust Fund loans are utility infrastructure loans in which user fees payable into special funds are pledged for repayment, these loans fall under the special fund doctrine and are considered revenue bond debt, rather than a debt of the municipality. (Municipality of Metropolitan Seattle v. Seattle, 57 Wn.2d 446, 357 P.2d 863 (1960)). As quoted in the State Auditor’s Office BARS Manual at http://www.sao.wa.gov/local/BarsManual/Documents/gaap_p3_limitindebt.pdf

See also 39.36.060 (Debt Limit) Chapter not applicable to loan agreements under chapter 39.69. Government loans don’t count against debt limits.
See also RCW 39.36.010 Municipal Corporation Defined

As used in this chapter, "municipal corporation" includes counties, cities, towns, port districts, water-sewer districts, school districts, metropolitan park districts, or such other units of local government which are authorized to issue obligations. Since all of these agencies have their own sources of funding, contracts with and assistance to these agencies are exempt from the State Debt Limit. To be clear however, each of these agencies are restricted by their own local debt limits.




A fifth benefit of limiting the Washington Public Trust to public works and public school projects is that they can clearly be defined as “investments” rather than debts. Public agencies have to be able to make investments in order to protect the health, welfare and safety of the citizens. In fact, the Washington State Constitution provides that it is the “Paramount Duty” of the State to amply fund our public schools. The Washington Public Trust would allow the State to more efficiently carry out this paramount duty by avoiding the billions of dollars in fees and interest payments currently being spent on private for profit commerical bank loans.




A sixth benefit of limiting the Washington Public Trust to public works and public school projects is that it would insure the safety of funds held by and used by the Public Trust. It is a fact that no school district or other government entity in Washington State has ever failed to meet its financial and/or contractual obligations.

In fact, nearly all local government entities including school districts are required by law to meet their financial obligations. Thus, there is literally no risk to the Washington Public Investment Trust – just as there was no risk of default with the Public Works Trust Fund.

Here is a Table Summarizing the differences and similarities between the Washington Public Trust and the Washington Investment Trust

Comparing Two Models

Washington
Public Trust


Washington

Investment Trust

Limited scope to public works and public schools

Yes

No

Definite Source(s) of Capitalization

Yes

No

Commission to Protect Investment Trust Fund from legislative sweeps

Yes 5 Members

Yes 5 Members

Potential Impact on State Debt Limit

No

Yes

Investments versus Debts

Investments

Debts

Constitutional Questions

No

Possibly

Safety of Funds

Extremely Safe

Likely Safe

Likely to pass legislature

?

No

Addresses school funding paramount duty

Yes

?

Solves the Public Works Trust Fund dilemma

Yes

?



While the Washington Investment Trust model is more like the Bank of North Dakota, experience over the last 8 years has shown that it is far less likely to pass the State legislature. In order to help legislators gain more faith in the Public Trust model, we should therefore start with a limited Washington Public Trust which can then be expanded as it proves its worth to the legislature over the years.


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