DISTRICTS ‑- SCHOOLS ‑- BOND REDEMPTION FUND ‑- DEPOSIT OF PUBLIC UTILITY DISTRICT PAYMENT ‑- AMOUNT NOT TO BE INCLUDED IN COMPUTING STATE EQUALIZATION FOR CURRENT OPERATIONS.
(1) The proceeds of the payment a public utility district must make to a school district under RCW 54.28.080 are to be placed in the appropriate bond redemption fund of the school district.
(2) Same: The state superintendent of public instruction does not have the authority to consider such payment by a public utility district to a school district as a district asset before determining the district's equalization status under RCW 28.41.080.
- - - - - - - - - - - - -
August 13, 1963
Honorable Louis Bruno
Superintendent of Public Instruction
Old Capitol Building
Cite as: AGO 63-64 No. 48
By letter previously acknowledged, you have requested an opinion of this office on the following questions:
(1) Under chapter 54.28 RCW, should the proceeds of the mandatory payment required by RCW 54.28.080 be placed in the school district's general fund, building fund, either fund, or in one lawfully designated fund?
(2) Does the superintendent of public instruction whose responsibilities relative to state equalization appear in RCW 28.41.080, have authority to consider such payment as a district asset before determining the district's equalization status, irrespective of the fund of the district in which the tax imposed under chapter 54.28 RCW is placed?
We answer your questions as explained in the analysis.
In order to completely understand the nature of the payments required by RCW 54.28.080, it is necessary to first point out that Amendment 14 of the Washington Constitution reads in part as follows:
[[Orig. Op. Page 2]]
". . . Property of the United States and of the state, counties, school districts and other municipal corporations . . . shall be exempt from taxation. . . ."
Public utility districts are municipal corporations (see, Public Utility Dist. No. 1 v. Benton County, 185 Wash. 339, 54 P.2d 1011 (1936), and 42 OAG 203 [[1941-42 OAG 203 to Prosecuting Attorney, Lewis County on July 10, 1942]], and therefore come within the purview of (1936), and 42 OAG 203), and therefore come within the purview of Amendment 14,supra. Therefore, when a public utility district purchases operating property which is within the boundaries of a school district, this property is removed from the property tax rolls. Prior to such a purchase said property would of course be a part of the school district's assessed valuation and subject to the school district's levies.
Thus, assuming the voters of a school district, based upon the district's assessed valuation, approve a large bond issue and then a large portion of the district's assessed valuation is lost by the removal of public utility purchases from the tax rolls, it would be possible for the district to be left with a large bonded indebtedness and no base for said bonds, that is, nothing to assess for payment. To eliminate this possibility and to protect for the bondholders a bond base, the legislature has provided in RCW 54.28.080, that:
"Whenever any district acquires an operating property from any private person, firm, or corporation and a portion of the operating property is situated within the boundaries of any school district and at the time of such acquisition there is an outstanding bonded indebtedness of the school district, then the public utility district shall, in addition to the tax imposed by this chapter, pay directly to the school district a proportion of all subsequent payments by the school district of principal and interest on said bonded indebtedness, said additional payments to be computed and paid as follows: The amount of principal and interest required to be paid by the school district shall be multiplied by the percentage which the assessed value of the property acquired bore to the assessed value of the total property in the school district at the time of such acquisition. Such additional amounts shall be paid by the public utility district to the school district not less than fifteen days prior to the date that such principal and interest [[Orig. Op. Page 3]] payments are required to be paid by the school district. . . ."
Thus, under RCW 54.28.080, supra, the public utility district is not being taxed. Rather it is paying, in lieu of the tax that would be imposed were the public utility district's properties on the rolls, an amount which, when determined by the statutory formula, is paid directly to the school district. Although the statute, as quoted above, speaks in terms of payment directly to the school district from the public utility district, it is obvious that this means nothing more than payment to the legally designated officer who is to receive and hold all moneys belonging to the school district.
RCW 28.48.100, provides in part as follows:
"The county treasurer of each county shall be ex officio treasurer of the several school districts of his county, and he shall:
"(1) Receive and hold all moneys belonging to such school districts, and pay them out only on warrants legally issued;"
A reading of the above quoted statutes makes two things quite clear; (1) that the moneys are to be paid to the officer designated by law to handle the district's money, i.e., the county treasurer; (2) that these payments are for the purpose of making part of the current payments on whatever bonded indebtedness may be involved.
This latter proposition is apparent from the general picture reflected by a reading of RCW 54.28.080. Specifically this is reflected in the fact that the statute only comes into effect when a public utility district buys property upon which there is based a present bonded indebtedness; from the fact that the public utility district payment is computed by multiplying the percentage which the assessed value of the property acquired by the public utility district bore to the total assessed value of the school district at the time of acquisition; and from the fact that the public utility district is required to make the payment fifteen days prior to the date when the school district's bond payments are due.
Since the public utility district payments are to be handled by the county treasurer and are for the purpose of making part of the current payments upon a specific school district's bonded indebtedness, it is our conclusion that these moneys must therefore be placed in the proper bond redemption fund of the school district.
[[Orig. Op. Page 4]]
For ease of reading we again set out your second question:
Does the superintendent of public instruction, whose responsibilities relative to state equalization appear in RCW 28.41.080, have authority to consider such payment as a district asset before determining the district's equalization status, irrespective of the fund of the district in which the tax imposed under chapter 54.28 RCW is placed?
RCW 28.41.080, which outlines the state superintendent's duties relative to apportionment of state funds for equalization purposes, provides as follows:
"Each year the county superintendent of schools shall compute the amount needed by each school district of his county to provide it with the minimum revenue requirements necessary to maintain the ordinary standards ofmaintenance and operation for the school year of:
"(1) The number of cents for each day of attendance credit required to meet the equalization level defined in RCW 28.41.010, which attendance credit shall be based upon an estimate derived in the manner prescribed in RCW 28.41.060 and shall be adjusted, if necessary, to provide a minimum of forty-five hundred days of attendance credit for each educational unit to be maintained by the district during the school year; and
"(2) Thirty percent of the reimbursement due the district for its costs of transportation as provided by law.
"He shall also compute the amount which, irrespective of any delinquencies, five‑sixths of the maximum school district levy permissible without a vote of the electors would produce upon the assessed valuation of each district without regard to any limitation imposed on the tax levy of the district by virtue of any requirements respecting the payment of bonded indebtedness. To this amount he shall add the actual receipts of the school district during the preceding school year from the county high school fund and such other receipts as the superintendent of public instruction shall determine in conformity with the intent of this section, and, if this total sum is less than the equalization level for each day's [[Orig. Op. Page 5]] attendance computed as hereinbefore set forth plus thirty percent of the cost of transportation for the school year, the county superintendent of schools shall certify to the superintendent of public instruction such computations and deficit, and the actual tax levy for such district. The superintendent of public instruction shall place such deficit for such district as a charge against thecurrent state school fund, and such additional amount shall be due and apportionable as an equalization payment: Provided, That such adjustments shall be made by the aforesaid officer in the amount of the equalization payment to each school district for the following school year as may be necessary to compensate for differences between the payment made during the preceding school year and the amount of the school district's entitlement for that year as determined on the basis of the county superintendent's annual report for said year." (Emphasis supplied.)
Generally speaking, RCW 28.41.080 provides that the county superintendent shall compute the amount needed in each district in his county to have a minimum revenue available in order to maintain the ordinary standards of maintenance and operation for that year. In so doing, the county superintendent used the factors set out in subdivisions (1) and (2) of RCW 28.41.080,supra. He then also computes how much money (under our present law) an 8.6 mill levy will bring in each district. To this he adds any nonhigh payments due from the county high school fund to each district and "such other receipts as the superintendent of public instruction shall determine in conformity with the intent of this section." Then if the amount derived from subdivisions (1) and (2) is greater than the amount derived from the money to be received from the 8.6 mill levy, the nonhigh payments and the other receipts which may be included, the county superintendent certifies this deficit to the state superintendent and this deficit becomes the equalization payment for the district.
It should be noted that we are dealing with "equalization" in terms of state aid for "maintenance and operation" and not "equalization" for school plant projects, which is provided for in chapter 28.47 RCW. This point alone indicates the answer to the second question. That is, chapter 28.41 RCW deals with current support of the common schools on the state level. RCW 28.41.080, as well as all the other sections of chapter 28.41 RCW, speaks only in terms of those items which go to make up the current support of the school districts and do [[Orig. Op. Page 6]] not mention the items which are available for school plant projects.
RCW 28.41.080 specifically limits the county superintendent to a computation of the amount needed for "maintenance and operation" and all factors mentioned in RCW 28.41.080 relate to money to be received for current operations. Further the deficit or equalization payment is characterized "as a charge against the current state school fund." The current state school fund can only be used for maintenance and operation. Sheldon v. Purdy, 17 Wash. 135, 49 Pac. 228 (1897), and AGO 63-64 No. 6 [[to Charles P. Moriarty, State Senator on January 23, 1963]].
Therefore, we conclude that the payments required of a public utility district under RCW 54.28.080, which are for the purpose of making the payments on bonded indebtedness incurred for the construction of school plant projects, may not be adjudged a receipt to be considered in determining equalization under RCW 28.41.080.
In summary it is our conclusion that the payments made pursuant to the direction of RCW 54.28.080 must be placed in a specific bond redemption fund and may not be considered a "receipt" under RCW 28.41.080.
We trust the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
Assistant Attorney General