HOUSING AUTHORITIES ‑- FUNDS ‑- BANKS ‑- INVESTMENTS ‑- INVESTMENT OF HOUSING AUTHORITY FUNDS IN CERTAIN SECURITIES
A public housing authority established pursuant to chapter 35.82 RCW, although authorized to purchase time certificates of deposit issued by certain in-state financial institutions under chapter 39.68 RCW, has no legal authority to purchase such certificates of deposit when issued by out-of-state financial institutions.
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February 24, 1977
Honorable Robert V. Graham
Olympia, Washington 98504 Cite as: AGLO 1977 No. 8
By recent letter you requested our opinion regarding the investment of funds of a city or county housing authority established pursuant to chapter 35.82 RCW. Specifically you asked:
". . . 'May the Housing Authority purchase time certificates of deposit issued by out-of-state financial institutions?'"
We answer this question in the negative for the reasons set forth in our analysis.
City or county housing authorities established pursuant to chapter 35.82 RCW are declared by RCW 35.82.020(1) and RCW 35.82.030 to be public corporations. Our supreme court has also specifically referred to such an entity as a "municipal corporation." See, e.g.,Clark v. Housing Authority, Etc., 25 Wn.2d 419, 171 P.2d 217 (1946). Although such authorities are initially created by specific action of a city or county, once created they function as independent corporate entities. Accord, letter opinion dated May 2, 1968, to State Representative Kopet, copy enclosed. However, as municipal corporations they are purely [[Orig. Op. Page 2]] creatures of statute and their powers are therefore limited to those which are granted expressly by statute or by implication from such an express grant of authority. Pac. Etc. Ass'n v. Pierce County, 27 Wn.2d 347, 178 P.2d 351 (1947); see, also, AGO 55-57 No. 111 [[to Charles O. Carroll, Prosecuting Attorney of King County, on June 30, 1955]], copy enclosed. With certain exceptions not applicable to housing authorities, the powers of municipal corporations are thus strictly construed. Where a statute leaves it doubtful that a power was meant to be granted to such a municipal corporation, the doubt is generally resolved against the existence of the power. Pac. Etc. Ass'n v. Pierce County,supra.
Our research has disclosed no statute expressly authorizing a housing authority to invest its funds in time certificates of deposit. The only express grants of statutory authority we have found relating to the investment of housing authority funds, either by specific mention or in general terms, are as follows:
(1) RCW 39.60.050, which declares it lawful for state or municipal funds to be invested in ". . . notes, bonds, or debentures of savings and loan associations, banks, mutual savings banks, savings and loan service corporations . . . and corporate mortgage companies: . . .";
(2) RCW 35.82.070(5), which expressly authorizes housing authority funds to be invested in ". . . property or securities in which savings banks may legally invest funds subject to their control; . . .";
(3) RCW 36.29.020, which authorizes any municipal treasurer to invest funds of the municipality in ". . . savings or time accounts in banks, trust companies and savings bankswhich are doing business in this state. . . ." (emphasis supplied) under certain safeguards; and
(4) Certain provisions of chapter 39.58 RCW (the public deposit protection act) which we will proceed to discuss at a later point in this opinion.
The first of these four possible sources of authority now appears to us to have no application although, as you know, that statute (RCW 39.60.050) was relied upon in an earlier informal memorandum opinion (not formally processed) in which the writer thereof indicated an affirmative answer to your present question. Upon further reflection, however, we must now reject that solution to the problem on the ground that a certificate of deposit is neither a note, a bond nor a debenture falling within the purview of RCW 39.60.050,supra.
[[Orig. Op. Page 3]]
RCW 35.82.070, the second of the statutes above referred to, although it likewise does not mention time certificates of deposit, would possibly support a more persuasive argument (in conjunction with the investment powers of mutual savings banks under chapter 32.20 RCW) for the ability of a housing authority to invest its funds in time certificates of deposit in out-of-state banking institutions. However, in construing that statute (like all others) the sole purpose must be to ascertain the legislature's intention. Cory v. Nethery, 19 Wn.2d 326, 142 P.2d 488 (1943). Here, several interpretative difficulties make it impossible to say with any confidence that the legislature ever meant that RCW 35.82.070(5), either alone or in conjunction with other statutes relating to savings banks, should consitute authorization for a housing authority to invest its funds in time certificates of deposit.
The first such interpretative problem involves the definition of "savings bank" as that term is used in RCW 35.82.070(5). If by that term the legislature meant "savings banks" as defined in RCW 30.04.010, then RCW 35.82.070(5) would be virtually meaningless because nowhere in Title 30 RCW is there any listing of legal investments for "savings banks" that is comparable to the listing of securities in which mutual savings banks may invest funds under RCW 32.20.030-32.20.490, to which we will next refer. Accordingly, because the legislature is not presumed to have engaged deliberately in vain or useless acts (Roza Irr. Dist. v. State, 80 Wn.2d 633, 497 P.2d 166 (1972)), it is possible to overcome that initial hurdle by assuming that by "savings banks" the legislature actually meant "mutual savings banks."
The next interpretative problem, then, is to determine, notwithstanding the seemingly broad language of RCW 35.82.070(5), what specific investments of a mutual savings bank are actually available to a housing authority. The only statute which arguably grants to a mutual savings bank the authority to invest in a time certificate of deposit is RCW 32.20.370 which provides as follows:
"A mutual savings bank may invest its funds in bonds or other interest bearing or discounted obligations of corporations not otherwise eligible for investment by the savings bank which are prudent investments for such bank in the opinion of its board of trustees or of a committee thereof whose action is ratified by such board at its regular meeting next following such investment. The total amount a mutual [[Orig. Op. Page 4]] savings bank may invest pursuant to this section shall not exceed fifty percent of the total of its guaranty fund, undivided profits, and unallocated reserves, or five percent of its deposits, whichever is less."
However that statute, in our opinion, does not sufficiently show legislative intent to authorize a housing authority to invest in time certificates of deposit ‑ or any other particular class of investment. In the first place, RCW 32.20.370 does not directly authorize investments in any particular kind of corporate security. Instead it authorizes the board of trustees (or committee of the board) of a mutual savings bank to select certain investments in the exercise of its own sound judgment. Thus, a housing authority seeking to invest its funds pursuant to that statute would have to rely, not on the language of the statute itself, but on a case‑by-case determination made by a particular mutual savings bank. And secondly, the final sentence of RCW 32.20.370 imposes qualifications on such investments which are obviously peculiar to a bank, and inapplicable to a housing authority.
Thus, in our opinion, the power of a housing authority to invest its funds in time certificates of deposit pursuant to RCW 35.82.070(5) and RCW 32.20.370 is, at least, doubtful and, under the rule of strict construction set forth earlier in this opinion, we believe that such authority must be denied.
Next, we turn to RCW 36.29.020 and chapter 39.58 RCW, supra. The legislature's policy, when expressly authorizing investments of municipal funds in time certificates of deposits, appears in those laws to be consistent in limiting such investments to institutions located within the state of Washington. For example, by § 2, chapter 111, Laws of 1965, the legislature amended RCW 36.29.020 (relating to the custody and investment of municipal funds) to authorize the investment of such funds in ". . . savings or time accounts in banks, trust companies and savings banks which are doing business in this state. . ." (emphasis supplied) under certain safeguards. Several sessions later, in 1969, the legislature then enacted a comprehensive new chapter relating to the investment of public funds and in that chapter emphasized the same geographic barrier in regard to the investment of public funds in interest-bearing time certificates of deposit. That new law, known as the "public deposit protection act," originated as chapter 193, Laws of 1969, Ex.Sess., and is now codified for the most part in chapter 39.58 RCW. Section 8 of that law, now RCW 39.58.080, provides that:
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"Except as provided in RCW 39.58.110, no public deposit shall be made except in a qualified public depositary located in this state." (Emphasis supplied.)
Likewise, RCW 39.58.110, to which reference is therein made, contains a similar geographic limitation. That statute, codifying § 11 of the public deposit protection act, provides that:
"Mutual savings banks and building or savings and loan associationslocated in this state may continue to hold and receive deposits of public funds in accordance with and subject to the limitations of statutes applicable to such institutions, without segregating collateral or otherwise complying with the provisions of this chapter." (Emphasis supplied.)
Accordingly, if we were here clearly dealing with deposits of the funds of a housing authority (and not, arguably, with the investment of such funds), we would have to conclude that even though no similar geographic limitation appears in RCW 35.82.070(5) or RCW 32.20.370, supra, an out-of-state bank would not be eligible to receive those funds. Moreover, that geographic barrier is further imposed by the act uponinvestment deposits. RCW 39.58.130, relating to what are referenced therein as "investment deposits," begins by stating that:
"A treasurer as defined in RCW 39.58.010 is authorized to deposit in investment depositsin a qualified public depositary1/ any public funds available for investment and secured by collateral in accordance with the provisions of this chapter, and receive interest thereon. . . ." (Emphasis supplied.)
[[Orig. Op. Page 6]]
It is true, of course, that RCW 39.58.130 then goes on to say that the authority granted thereby is ". . . additional to any authority now or hereafter provided by law for the investment or deposit of public funds by any such treasurer . . ." Accordingly, if it could be said that a housing authority has specific authority, by virtue of other statutes, to invest in interest bearing time certificates of deposit in banks located outside of the state of Washington, that separate grant of authority would be controlling. However, as we have seen, the only clear authorization by the legislature to invest housing authority funds in interest bearing time certificates of deposit is that found in RCW 36.29.020, supra, which limits such investments to financial institutions located within this state.
This consistent pattern of legislation makes us particularly reluctant to find, in the absence of clear legislative language to that effect, a legislative authorization for investment by housing authorities in time certificates of deposits without any such geographic barrier. Therefore, in conclusion, although we realize that the question is not entirely free from doubt, it is our opinion that a housing authority does not have the legal authority to invest in time certificates of deposit in financial institutions located outside of this state. In so advising you we see no constitutional objections to such deposits provided they are made under adequate safeguards. State ex rel. Graham v. Olympia, 80 Wn.2d 672, 497 P.2d 924 (1972). However, whether or not such investments should be permitted is a question of legislative policy and we presume that if it is desirable for a housing authority to be given that authority the legislature will amend or add to the enabling legislation of housing authorities to accomplish that result.
We trust that the foregoing will be of some assistance to you.
Very truly yours,
ROBERT F. HAUTH
Senior AssistantAttorney General
*** FOOTNOTES ***
1/Defined in RCW 39.58.010(2) as follows:
"'Qualified public depositary' means a state bank or trust company, national banking association, or any branch of a bank engaged in the banking business in this state in accordance with RCW 30.04.300 which is located in this state and which receives or holds public deposits and segregates eligible collateral for public deposits as described in RCW 39.58.050 as now or hereafter amended;"