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AGLO 1970 No. 083 - June 01, 1970
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Slade Gorton | 1969-1980 | Attorney General of Washington
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                                                                    June 1, 1970
 
 
 
Honorable William Chatalas
State Representative, 33rd Dist.
2802 33rd Avenue South
Seattle, Washington 98144
                                                                                                               Cite as:  AGLO 1970 No. 83
 
 
Dear Sir:
 
            By letter previously acknowledged, you have requested an opinion of this office on a question regarding the authority of a port district to borrow funds on a short-term temporary basis.  You have specifically identified your request as pertaining to the Port of Seattle, and have asked:
 
            "Can the Port borrow short-term temporary funds to prevent loss of cash due to cashing government securities before the maturity date?"
 
                                                                     ANALYSIS
 
            It is fundamental that a port district, being a municipal corporation, is a creature of statute and, as such, has only those powers which have been expressly granted to it by the legislature, or which may be said to arise by necessary implication from the powers which have been expressly granted.  See, State ex rel. Port of Seattle v. Sup'r Ct., 93 Wash. 267, 160 Pac. 755 (1916); Griggs v. Port of Tacoma, 150 Wash. 402, 273 Pac. 521 (1928); Hughbanks v. Port of Seattle, 193 Wash. 498, 76 P.2d 603 (1938).
 
            The words "necessary" or "essential" refer to legal necessity.  State ex rel. State Board Etc. v. Clausen, 84 Wash. 279, 283, 146 Pac. 630 (1915).  In other words, implied powers are those which are necessary to carry into effect powers which have been expressly granted, and which must, therefore, be presumed to have been within the intention of the legislative grant.  City of Madison v. Daley, 58 Fed. 751, 755 (1893).  However, if there is a reasonable doubt as to whether or not a particular power has been granted, it must be denied.  Griggs v. Port of Tacoma, supra; Pacific Etc. Assn. v. Pierce County, 27 Wn.2d 347, 353, 178 P.2d 351 (1947); 2 McQuillin, Municipal Corporations, 3rd Ed., § 10.12, p. 765.
 
            Before proceeding to consider the issues raised by your question in the light of the foregoing precepts, we should mention that shortly before receiving your letter, we received a copy of a legal memorandum on the same general subject, which was written to the controller of the  [[Orig. Op. Page 2]] Port of Seattle by Mr. R. D. Ford, the Port District's legal officer, dated April 17, 1970.  Of course, we are always desirous of receiving the benefit of any legal briefing which other attorneys, public or private, may have done on a subject upon which our official consideration is requested by means of an Attorney General's opinion request.  In this case, Mr. Ford's memorandum also has provided some valuable insight into the background and nature of the problem.  A copy of it is enclosed for your reference.
 
            As Mr. Ford's memorandum discloses, the issue presented is not simply whether a port district can borrow short-term temporary funds to prevent a loss of the type described in your question.  There is no doubt but what a port district has the authority to incur indebtedness through the borrowing of money, within specified limitations.  See RCW 53.96.030-53.96.040.  Thus, if for some legitimate reason other funds of the district are not immediately available to meet the district's current financial needs, resort may then be made to the borrowing procedures set forth in these statutory provisions in order to obtain funds on a short-term basis to meet the current needs in question.
 
            However, manifest in the foregoing proposition is that the district's borrowing must be accomplished within the limitations specified in the governing statutes.  One of the limitations upon the borrowing power of a port district under RCW 53.96.030-53.96.040, supra, is that it can only borrow "for district purposes."  It is this limitation which gives rise to the qualification appearing in the preceding paragraph of this opinion ‑ i.e., that there must be "some legitimate reason" as to why current funds of the district are not available to meet its immediate needs ‑ and, thereby, to obviate the necessity for borrowing.
 
            By way of further identification this critical point of distinction, it is to be noted that under RCW 53.36.050, a port commission may authorize its county treasurer (who is the custodian of the district's funds) to invest ". . . any portion of such port moneys determined by the port commission to be in excess of the current needs of the . . . district . . ." in certain designated investment securities.
 
            If a given port district has authorized the investment of its available surplus funds under this statute, to a reasonable extent, over a reasonable period of time, and under circumstances which would result in an actual substantial loss if these investments were immediately liquidated,  [[Orig. Op. Page 3]] it would be our opinion that the port district would be justified in borrowing on a temporary basis, under RCW 53.36.030-53.36.040, supra, to avoid the financial hardship of such an immediate liquidation of its investments.  Borrowing, under such a circumstance as this, would be for a "legitimate reason" ‑ and thus, "for district purposes."
 
            On the other hand, if a particular port district should be discovered very often to be in the position of having to borrow funds for the reason that its current uninvested funds are consistently not adequate to meet its immediate needs, it should be obvious that the district's taxpayers and/or the state auditor would have justification for concern.  Here, the port district's rationale for its borrowing would have to be either (a) an official policy of the district to over-invest its funds over and beyond ordinary "surplus"; or (b) negligence in not sufficiently anticipating expenditure needs; or (c) a combination of the two.  The legal issue which would arise from this type of financial situation involving a particular port district would be whether a district could be said to have authority, deliberately to follow a policy of investing funds in such a manner that ordinary or anticipated expenses could not be met without borrowing.
 
            On the resolution of this issue, we are in full agreement with Mr. Ford, in his memorandum, supra, that such a policy would be contrary to law.  Simply stated, this policy would not be in accordance with the investment authority granted to the various port districts by RCW 53.36.050, supra.
 
            Moreover, it is clear that the business of banking ‑ or of investing its funds for the deliberate purpose of receiving a profit over and above the comparative cost of borrowing in order to meet the district's immediate financial needs ‑ is not one of the statutory purposes for which the various port districts in the state were created.  These purposes, in general, are spelled out in RCW 53.04.010, as follows:
 
            "Port districts are hereby authorized to be established in the various counties of the state for the purposes of acquisition, construction, maintenance, operation, development and regulation within the district of harbor improvements, rail or motor vehicle transfer and terminal facilities, water transfer and terminal facilities, air transfer and terminal facilities, or any combination of such transfer and terminal facilities, and other commercial transportation, transfer, handling, storage and  [[Orig. Op. Page 4]] terminal facilities, and industrial improvements."
 
            In addition to RCW 53.36.050, supra, which authorizes only the investment of those port district funds which are determined by the port commission ". . . to be in excess of the current needs of the port district . . ." similar provisions appear in RCW 36.29.020, relating to the investment of all municipal funds held by the various county treasurers.  This statute provides in pertinent part as follows:
 
            ". . .  Any municipal corporation may by action of its governing body authorize any of its funds which are not required for immediate expenditure, . . . to be invested by such treasurer . . .
 
            "Whenever the funds of any municipal corporation which are not required for immediate expenditure are in the custody or control of the county treasurer, and the governing body of such municipal corporation has not taken any action pertaining to the investment of any such funds, the county finance committee shall direct the county treasurer to invest, to the maximum prudent extent, such funds or any portion thereof . . ."  (Emphasis supplied.)
 
            From these various expressions by the legislature, it seems clear that it does not intend that any municipal corporation shall be deemed to have the authority to invest its funds in such a manner as, intentionally, to make them unavailable for anticipated expenses, thereby requiring the borrowing of funds to meet current needs which could, or should, have been anticipated at the time the investments were made.  Accord, AGO 1967 No. 23 [[to State Auditor on June 20, 1967]], a copy of which is enclosed.
 
            Thus, in summary, it will readily be seen that the question which you have posed cannot be answered with a simple "yes" or "no."  Instead, the legality of each transaction of that type which underlies your request must be judged on the basis of all the facts pertaining thereto, within the framework of the guidelines which we have attempted to spell out in this opinion.
 
             [[Orig. Op. Page 5]]    We trust the foregoing will be of some assistance to you.
 
Very truly yours,
 
FOR THE ATTORNEY GENERAL
 
 
Robert F. Hauth
Assistant Attorney General
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