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AGO 1967 No. 34 - October 02, 1967
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John J. O'Connell | 1957-1968 | Attorney General of Washington


DISTRICTS - SCHOOLS - EFFECT OF 1967 COMMUNITY COLLEGE ACT ON EXISTING BONDED INDEBTEDNESS AND BONDING CAPACITY.

(1) Pursuant to § 74, chapter 8, Laws of 1967, Ex. Sess., a common school district previously operating a community college is presently authorized to issue bonds previously authorized by the electorate for common school (k-12) purposes provided (1) the total indebtedness of the district excluding any bonded indebtedness incurred for community college purposes will not exceed 10% of the assessed valuation of the taxable property in the district; and (2) the total indebtedness of the district including any bonded indebtedness incurred for community college purposes will not exceed the constitutional debt limit of the district.  Article VIII, § 6, Amendment 27.

(2) In the absence of the availability of other funds with which to discharge general obligation bonds issued by a common school district for community college purposes prior to the effective date of the community college act of 1967 (chapter 8, Laws of 1967, Ex. Sess.), a common school district which issued such bonds is expressly required under § 60 of the act to continue levying and collecting taxes to retire the bonds in accordance with the terms and conditions stated therein.

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                                                                 October 2, 1967

Honorable Francis E. Holman
State Representative, 1st District
5050 N.E. 178th St.
Seattle, Washington 98155

Honorable R. D. McDougall
State Representative, 12th District
Route 2, Box 2001
Wenatchee, Washington 98801

                                                                                                                 Cite as:  AGO 1967 No. 34

Gentlemen:

            By letter previously acknowledged you have requested an opinion of this office on certain questions concerning the powers, duties and obligations of common school districts as affected by the community college act of 1967 (chapter 8, Laws of 1967, Ex. Sess.).  We paraphrase your questions as follows:

            (1) Does § 74, of the community college act of 1967, permit  [[Orig. Op. Page 2]] a common school district presently to issue bonds previously authorized by the electors for common school (k-12) purposes where the total of the district's indebtedness, excluding indebtedness incurred for community college purposes, will not exceed the maximum debt limit fixed by statute?

            (2) Is a common school district which issued general obligation bonds for community college purposes prior to the effective date of the 1967 community college act required to continue levying and collecting taxes to retire the bonds in accordance with the terms and conditions stated therein, in the absence of the availability of other funds with which to discharge these obligations?

            We answer both questions in the affirmative, for the reasons set forth in our analysis.

                                                                     ANALYSIS

            The 1967 legislature made a significant change in the operation and administration of our community college system.  In the past, community colleges have been constructed, maintained and operated by common school districts.  However, the legislature by the enactment of the community college act of 1967 (chapter 8, Laws of 1967, Ex. Sess.), established a new state community college system which it described in § 2 (5) as

            ". . . an independent, unique, and vital section of our state's higher education system, separate from both the common school system and other institutions of higher learning, . . ."

            For the purposes of this opinion we are concerned with only those provisions of the community college act which relate to the bonded debt and bonding capacity of those common school districts which formerly operated the community colleges.

            Question (1):

            Does § 74 of the community college act of 1967, relating to computation of maximum allowable indebtedness of school districts, permit a school district presently to issue bonds previously authorized by the electors for common school (k-12) purposes where the total of the district's indebtedness, including indebtedness incurred for community college purposes, will not  [[Orig. Op. Page 3]] exceed the maximum debt limit fixed by statute?

            Whenever any question is raised regarding the power or authority of a common school district, it must be remembered that a school district, as a municipal corporation, has only those powers expressly granted by the legislature, those necessarily or fairly implied in or incident to the powers granted, and those essential to the declared objects and purposes of the municipal corporation.  Seattle High School Ch. No. 200 v. Sharples, 159 Wash. 424, 293 Pac. 994 (1930);Juntila v. Everett School District No. 24, 178 Wash. 637, 35 P.2d 78 (1934).

            Initially, it should be noted in answering your first question that once an authorization to issue bonds has been legally obtained from the electors (see chapter 39.96 RCW, chapter 28.51 RCW, RCW 84.52.056, and AGO 59-60 No. 133) a common school district may proceed to sell the bonds at any time within a period of two years from the date of the election.  See RCW 28.51.070; also, AGO to prosecuting attorney of Yakima county dated May 7, 1945, question (1).  Furthermore, it is well established in this state that the authority and bonding capacity of a school district are to be determined as of the date the bonds are issued - not the date on which the bonds are authorized by the electors.  See,State ex rel. School Dist. No. 301 v. Clausen, 109 Wash. 37, 186 Pac. 319 (1919);Seymour v. Tacoma, 6 Wash. 427, 33 Pac. 1059 (1893); AGO 51-53 No. 453.

            Therefore, we must examine § 74 of the community college act to ascertain its impact upon the present bonding capacity of common school districts.  The section reads as follows:

            "Notwithstanding any other statutory provision relating to indebtedness of school districts,bonds heretofore issued by any common school district for the purpose of providing funds for community college facilities shall not be considered as indebtedness in determining the maximum allowable indebtedness under any statutory limitation of indebtedness when the sum of all indebtedness therein does not exceed the maximum constitutional allowable indebtedness applied to the value of the taxable property contained in such school district:  PROVIDED, That nothing contained herein shall be construed to affect the distribution of state funds under any applicable distribution formula."  (Emphasis supplied.)

             [[Orig. Op. Page 4]]

            Since the act contained an emergency clause (§ 79), the entire act (including § 74) became effective when it was signed into law by the governor on April 3, 1967.  Accordingly, under § 74, any bonded indebtedness incurred by a school district "heretofore," that is, prior to April 3, 1967, (see, Skidmore v. Clausen, 116 Wash. 403, 199 Pac. 727 (1921)), for community college purposes may be excluded by the common school district in determining its maximum allowable statutory debt limitation as of that date and subsequent thereto.

            The distinction between the statutory and constitutional debt limitation of a school district must be understood in order to completely appreciate the significance of § 74.  In this connection, see AGO 1967 No. 19, copy enclosed.

            Under Article VIII, § 6, Amendment 27, of the state constitution the maximum debt limitation of school districts is fixed at, and may not exceed ten (10) percent ". . . of the value of the taxable property therein to be ascertained by the assessment for state and county purposes previous to the incurring of such indebtedness."  (Emphasis supplied.)

            In 1917, in the case ofHansen v. Hoquiam, 95 Wash. 132, 163 Pac. 391 (1917), the supreme court had occasion to pass upon the scope and meaning of the limitation contained in Article VIII, § 6.  The court concluded that theconstitutional debt limitation of municipal corporations (including school districts) was to be computed on the basis of the value of thetaxable property in the district -not the assessed valuation of the taxable property in the district.  TheHansen case was filed on February 28, 1917.

            The legislature reacted promptly to the court's decision.  On March 15, 1917, the governor signed chapter 143, Laws of 1917, under which the legislature reduced the permissible debt limitation of taxing districts by providing the debt limit was to be computed on the basis of assessed rather than on the actual value of the taxable property in the taxing district.  Section 1, chapter 143, as amended, is codified as RCW 39.36.020.  See,State ex rel. School District No. 102 v. Clausen, 116 Wash. 432, 199 Pac. 752 (1921).  The action of the legislature in fixing the lower debt limitation for taxing districts in this state was clearly within the power of our lawmakers.  See,Henderson v. Tumwater, 46 Wn.2d 758, 285 P.2d 119 (1955).  See, also, AGO 65-66 No. 123, page 4, footnote 3.

             [[Orig. Op. Page 5]]

            Thus, for many years school districts, when incurring indebtedness and issuing general obligation bonds for any authorized school district purpose, have been limited by RCW 39.36.020 to a maximum indebtedness of ten percent of theassessed value of the taxable property in the district.1/

             The legislature, in effect, by the inclusion of § 74 in the community college act of 1967, simply expanded to a limited degree thestatutory bonding capacity of those school districts which formerly operated community colleges and which had incurred bonded indebtedness in connection with the construction of facilities therein.  This was accomplished by permitting bonded indebtedness incurred for community college purposes prior to April 3, 1967, to be excluded by a school district in computing itsstatutory debt limitation (RCW 39.36.020) as long as the total amount of the district's indebtedness does not exceed that fixed by Article VIII, § 6, Amendment 27.

            Accordingly, it is our opinion that a district heretofore authorized by the electors of the district to issue general obligation bonds, payable out of excess levies for the purposes of construction of k through 12 facilities may proceed with the issuance and sale of said bonds provided (1) the total indebtedness of the district excluding any bonded indebtedness incurred for community college purposes will not exceed 10% of the assessed valuation of the taxable property in the district; and (2) the total indebtedness of the district including any bonded indebtedness incurred for community college purposes will not exceed the constitutional debt limit of the district.  Article VIII, § 6 Amendment 27.

            Question (2):

            Is a common school district which issued general obligation bonds for community college purposes prior to the effective date of the 1967 community college act required to continue levying and collecting taxes to retire the bonds in accordance with the terms and conditions stated therein, in the absence of the availability of other funds with which to discharge these obligations?

             [[Orig. Op. Page 6]]

            InState ex rel. School Dist. No. 301 v. Clausen, supra, the court said:

            "It is elementary law that school districts, under our system of government, possess only such powers as may be conferred upon them by legislative enactment.  Whether or not such districts shall possess the power to borrow money and issue negotiable bonds evidencing their debts so created, is wholly a matter of legislative will.  It follows, as a matter of course, that such power may, by the legislature, be granted or withheld, and may, by the legislature, be taken away or limited after once being granted.  Dillon, Municipal Corporations (5th ed.) §§ 106, 889.  Such power of the legislature is subject only to the limitation that it shall not be exercised so as to impair the obligation of contracts. . . ."  (pp. 41-42.)  (Emphasis supplied.)

            Prior to the enactment of the community college act of 1967, a common school district which was operating a community college had the legal authority to incur indebtedness for community college facilities and to issue general obligation bonds as evidence thereof.  See, chapter 39.36 RCW and chapter 28.51 RCW.  Generally, if not universally, the general obligation bonds issued by a school district for community college facilities contained a covenant like or similar to the following:

            "The District hereby irrevocably covenants that it will, without limitation as to rate or amount, levy taxes annually on all of the taxable property within the District in an amount sufficient to pay the principal of and interest on the bonds as the same shall become due, and for the prompt payment of said principal and interest the full faith, credit and resources of the District are hereby irrevocably pledged."

            When such bonds were issued by a school district, a contract arose between the district and the bond purchasers.  It follows that the bond purchasers obtained a right to the enforcement of their contract and this right, under the state and federal constitutions, cannot be in any way limited or voided by the  [[Orig. Op. Page 7]] legislature.  See,Gruen v. State Tax Commission, 35 Wn.2d 1, 211 P.2d 651 (1949);State ex rel. School Dist. No. 301 v. Clausen, supra.  In an opinion to the prosecuting attorney of Benton County, dated April 24, 1939, this office said:

            "The constitution of the United States prevents enactment of any law impairing the obligation of contracts by a state.  Sec. 10, Article I, of the United States constitution, and Article I, sec. 23, of the state constitution, provide that 'no bill or attainder, ex post facto law, or law impairing the obligations of contracts shall ever be passed.'

            "The bond issue is a contract between the district and the bond holder.  The state has no power either to command or permit the district not to pay the obligation it has assumed."

            Apparently recognizing the foregoing, the legislature, when it determined that the state would not assume the outstanding community college bonded indebtedness of common school districts, provided in § 60 of the 1967 community college act as follows:

            "Whenever a common school board has contracted to redeem general obligation bonds [the proceeds of which were] used for the construction or acquisition of facilities which are now to be under the administration, control and occupancy of the community college district board, the common school board shall continue to redeem the bonds in accordance with the provisions of the bonds."  (Emphasis supplied.)

            Therefore, it is our opinion that where a common school district, prior to April 3, 1967, lawfully issued general obligation bonds for community college purposes, it is required to continue levying and collecting taxes to pay the district's contractual bonded obligation when due, pursuant to the terms and conditions stated in the bonds, in the absence of the availability of other  [[Orig. Op. Page 8]] funds with which to discharge the obligation.

            We trust the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

ROBERT J. DORAN
Chief Assistant
Attorney General

                                                         ***   FOOTNOTES   ***

1/See in this connection RCW 84.40.020, Article VII, § 2, Amendment 17; State ex rel. Barlow v. Kinnear, 70 W.D.2d 460 [[70 Wn.2d 482)]](1967).

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