OFFICES AND OFFICERS ‑- COUNTY ‑- COMMISSIONERS ‑- AUTHORITY TO LOAN ROAD FUNDS TO CURRENT EXPENSE FUND ‑- DURATION OF LOAN ‑- CHARGING OF INTEREST.
A board of county commissioners may authorize a loan of surplus (nonappropriated) amounts in the county road fund to a solvent county expense fund on a temporary basis provided interest on the loan is charged.
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May 23, 1962
Honorable John Panesko
Cite as: AGO 61-62 No. 139
By letter previously acknowledged you have requested an opinion of this office on a question which we paraphrase as follows:
May a board of county commissioners authorize a temporary loan of county road funds to the county current expense fund?
We answer your question in the affirmative as explained in the analysis.
In AGO 61-62 No. 29, dated May 18, 1961, to the Honorable Charles O. Carroll, King County Prosecuting Attorney (to which you have made reference in your letter) we advised that, as a general proposition and subject to certain specified conditions, surplus (nonappropriated) amounts in a particular county fund may be loaned, on a temporary basis, to another solvent county fund. However, we expressed doubt as to whether this could be done in the case of what we characterized as a "special" fund; i.e., a fund which ". . . has been raised and earmarked for a special purpose."
The general rule on this point, as set forth in 42 Am.Jur., Public Funds, § 79, is as follows:
". . . When a special fund is raised for a particular purpose under legislative authority by a special tax or bond issue or the like, . . . it cannot be used for any other purpose either permanently or temporarily until the purpose for which it was intended has been fully accomplished. . . ." (Emphasis supplied.)
[[Orig. Op. Page 2]]
Your present question, basically, is whether a county road fund issuch a "special" fund.
RCW 36.82.010 provides that:
"There is created in each county of the state a county fund to be known as the 'county road fund.' Any funds which accrue to the credit of the secondary highway fund, general road and bridge fund, road district fund or any other fund of any county for use upon county roads, shall be credited to and deposited in the county road fund."
The sources from which a county road fund is derived are as follows:
(1) An annual uniform real property tax levy of not to exceed ten mills on a dollar on all taxable property in the county (RCW 36.82.040);
(2) Any funds accruing to the credit of the county from the state motor vehicle fund (RCW 36.82.050);
(3) Forest reserve funds distributed by the state treasury pursuant to RCW 36.33.110;
(4) "All proceeds from the sale or placing of any crushed rock, gravel or other road building material . . ." (RCW 36.82.120); and
(5) Fines and forfeitures for violations of highway codes (chapter 75, Laws of 1949, cf. RCW 36.82.210, 46.68.050, and 47.08.030).
With regard to the use or expenditure of funds derived from the first three of these sources, the legislature has made express provision.
With regard to the real property tax levy, RCW 36.82.020 provides:
"Any funds accruing to and to be deposited in the county road fund arising from any levy in any road district shall be expended for proper county road purposes entirely within the limits of the road district from which the same was or is collected: Provided, That nothing in this section shall prevent the loan or rental of equipment by one road district to another road district in the county."
[[Orig. Op. Page 3]]
With regard to funds accruing to the credit of a county from the state motor vehicle fund, RCW 36.82.070 provides that:
"Any money paid to any county from the motor vehicle fund may be used for the construction, alteration, repair, improvement, or maintenance of county roads and bridges thereon and for wharves necessary for ferriage of motor vehicle traffic, and for ferries, and for the acquiring, operating, and maintaining of machinery, equipment, quarries, or pits for the extraction of materials, and for the cost of establishing county roads, acquiring rights of way therefor, and expenses for the operation of the county engineering office, and for any other proper county road purpose. Such expenditure may be made either independently or in conjunction with the state or any city, town, or tax district within the county."
Additionally, under Article II, § 40 (Amendment 18) of the Washington Constitution, the motor vehicle fund is ". . . to be used exclusively for highway purposes." See,Washington State Highway Commission et al. v. Pacific Northwest Bell Telephone Co. et al., 159 Wash. Dec. 228 [[59 Wn.2d 216]](1961), and cases cited therein. See, however, AGO 55-57 No. 201 [[to State Treasurer on February 10, 1956]], 228 (1961), and cases cited therein. See, however, AGO 55-57 No. 201, wherein this office held that a loan from the motor vehicle fund to the general fund would not violate Amendment 18.
As for moneys derived from the distribution of federal forest reserve funds, RCW 36.33.110 provides that:
"County commissioners of the respective counties to which the money is distributed are authorized and directed to expend said money for the benefit of the public schools, including school maintenance and building purposes,and public roads thereof, and not otherwise." (Emphasis supplied.)
With regard to the proceeds derived from the sale of crushed rock, gravel or other road building material, RCW 36.82.120 merely provides that the same ". . . shall be deposited in the county road fund to be expended under the same provisions as are by law imposed upon the funds used to purchase crushed rock, gravel, or other road building material extracted and sold." And none of the statutory provisions, above cited, relating to fines and forfeitures for violation of highway codes,expressly limit the use or expenditure of county road funds [[Orig. Op. Page 4]] derived from this source to road or highway purposes.
However, we shall assume for the purpose of argument that no part of a county road fund, from whatever source derived may be used or expended for other than county road, bridge, or highway purposes. We are nevertheless of the opinion that any surplus (nonappropriated) county road fund moneys may be loaned, on a temporary basis, to a solvent county current expense fund under the conditions, and subject to the limitations expressed in AGO 61-62 No. 29,supra. To merely loan such surplus county road funds, on a temporary basis, to a solvent current expense fund, under a definite agreement for repayment at a stated rate of interest, would not constitute a diversion of such funds to other than county road, bridge, or highway purposes. See,Griffin v. Tacoma, 49 Wash. 524, 95 Pac. 1107 (1908), and, particularly, the following passage appearing on page 529:
". . . The word 'diverted' is used in the sense of turning permanently from its purpose, the equivalent of appropriation for some other use. A temporary transfer from the general fund to another fund with an assured incomeis not an appropriation or diversion. With its outstanding credit against the other fund, the assets of the general fund remain the same, and its power to accomplish general municipal purposes has not been decreased. The city controls both funds, and it is under the legal obligation to see that the general fund is seasonably reimbursed from the source of supply to the special one. Of course the city authorities must exercise common business sense in making such transfer. As a personal loan of magnitude is not ordinarily made to an individual who is insolvent, so a city should not transfer its general fund moneys as temporary loans to other funds that have not assured and certain sources of income, the collection of which is under the control of the city itself. . . ." (Emphasis supplied.)
In other words, a temporary loan, as distinguished from a transfer or diversion, has only the effect of changing the nature of the assets of the lending fund (from money to an enforceable account receivable); it does not constitute a depletion or reduction of the assets of the lending fund. See, AGO 55-57 No. 201,supra. Thus, the assets of the lending fund are not used or expended. They are merely temporarily changed in form.
[[Orig. Op. Page 5]]
Or, stated in the terms of your question, it is our view that a county road fund is not a "special" fund within the meaning of so much of AGO 61-62 No. 29,supra, as cast doubt upon whether certain funds could be loaned, even on a temporary basis, to another solvent fund. It is a special fund only in the sense that it is restricted as to the general type of objects to which it may be devoted. In this respect, it is no more a "special" fund than the current expense or "general" fund itself. See, RCW 36.33.010.
Consequently, consistent with the conclusions stated in AGO 61-62 No. 29,supra, we believe that surplus (nonappropriated) amounts in a county road fund may be loaned, on a temporary basis, to a solvent county current expense fund.
We trust that the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
PHILIP H. AUSTIN
Assistant Attorney General