SALE OF PUBLIC UTILITY REVENUE OBLIGATIONS TO DISTRICT EMPLOYEES

DISTRICTS ‑- PUBLIC UTILITIES ‑- BONDS ‑- OFFICERS AND EMPLOYEES ‑- SALE OF PUBLIC UTILITY REVENUE OBLIGATIONS TO DISTRICT EMPLOYEES

 (1) A public utility district is authorized by RCW 54.24.060 to sell its utility revenue obligations in such manner as the board of commissioners shall deem for the best interest of the district; under this statute, based upon an appropriate finding to this effect, utility revenue obligations may be sold privately as an alternative to a public sale following competitive bidding.

 (2) A public utility district may, pursuant to an appropriate resolution based on findings of benefit to the district, sell a portion of a particular issue of its revenue obligations to its employees by private sale at a rate of interest less than that offered to nonemployee purchasers so long as the employee purchasers are not officers of the district by, through, or under whose supervision the utility revenue obligations in question may have been issued.

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                                                                  March 18, 1971

Honorable Doris J. Johnson
State Representative, District 16-A
Legislative Building
Olympia, Washington 98501

                                                                                                                 Cite as:  AGO 1971 No. 13

 Dear Representative Johnson:

            By letter previously acknowledged, you have requested an opinion of this office upon certain questions relating to the sale of public utility district revenue obligations.  We paraphrase these questions as follows:

             (1) May a public utility district sell its utility revenue obligations in any manner other than by means of a public sale following competitive bidding?

            (2) If the answer to question (1) is in the affirmative, may a public utility district sell a portion of a particular issue of its revenue obligations to its own employees  [[Orig. Op. Page 2]] at a rate of interest less than that offered to nonemployee purchasers?

            We answer question (1) in the affirmative; and question (2) in the affirmative subject to a qualification set forth in our analysis.

                                                                     ANALYSIS

            Question (1):

            Your first question, we think, is readily answerable in the affirmative based upon the specific provisions of RCW 54.24.060.  This statute, which governs the sale of public utility district revenue obligations, reads, in material part, as follows:

            "Such utility revenue obligations shall be sold and delivered in such manner, at such rate or rates of interest and for such price or prices and at such time or times as the [public utility district] commission shall deem for the best interests of the district.  . . ."  (Emphasis supplied.)

            A similarly worded predecessor to this statute, Rem. Supp., § 11611-4 was the subject of judicial consideration in Bayha v. Public Utility District No. 1, 2 Wn.2d 85, 115, 97 P.2d 614 (1939).  In that case, the court concluded that this statute conferred discretion upon public utility district commissioners to sell their utility revenue bonds in any manner which the commissioners deemed to be for the best interests of the district, including a private sale, without advertising for bids.  The statute therein construed provided, in material part, as follows:

            "Such utility revenue bonds or warrants shall be sold in such manner and for such price or prices as the Commission shall deem for the best interests of the district:  . . ."  (Emphasis supplied.)

            The underscored language of Rem. Supp. § 11611-4 has been carried forward, with no significant alteration, in RCW 54.24.060, and from this we conclude that, whatever may be  [[Orig. Op. Page 3]] the rule with respect to certain other municipal corporations,1/ RCW 54.24.060, applicable to public utility districts only, permits the sale of district utility revenue obligations by private sale, or by any other reasonable and appropriate marketing technique which the district commissioners find ". . . [to be] for the best interests of the district.  . . ."2/

             Question (2):

            In responding to your second question, we again rely upon this same special statute dealing with public utility revenue obligations.  For ease of reference, we will reiterate here what we consider to be the relevant language of that statute:

            "Such utility revenue obligations shall be sold and delivered in such manner, at such rate or rates of interest and for such price or prices and at such time or times as the [public utility district] commission shall deem for the best interests of the district.  . . ."  (Emphasis supplied.)

            The language which we have underscored above was added to RCW 54.24.060 by § 78, chapter 56, Laws of 1970, Ex. Sess., and was intended to permit public utility districts to market bond issues and other obligations at whatever interest rate is available without any limiting maximum rate.3/   However, even though this was the stated intent of this 1970 amendment, we think that it is also readily inferable from the reference to "rate or rates of interest" that the legislature intended to permit public utility districts to market an issue of revenue bonds on the basis of a segregation of the issue into more than one series, with each separate series earning a different rate of interest for the purchaser.  Moreover, RCW 54.24.060 also permits  [[Orig. Op. Page 4]] the sale of revenue obligations ". . . at such time or times as the commission shall deem for the best interests of the district.  . . ."  From this language, we infer a legislative intent not only to permit public utility districts to market an issue of revenue obligations by segregation into series on the basis of interest and/or price, but as well to permit the sale of one such series in one manner and at one time, and another series in another manner and at another time.  Thus, we believe that there can be no doubt but that a public utility district may, under appropriate findings of district benefit, reserve for either a later public or private sale a particular series of a revenue obligation issue which will then bear interest at a rate lower than that applicable to a previously marketed series of the same issue.

            This leaves us, then, with only the question of legality of a sale, by any means, of public utility district revenue obligations to employees of the issuing district.  Based upon the foregoing analysis of the extent of such a district's powers with respect to the marketing of its revenue obligations, this remaining question ceases to be one of authority and, instead, becomes one of whether there are any statutory prohibitions against a sale by the district to its own employees.

            The only statute which we have discovered that would appear to negate the validity of such a sale in a given case is RCW 42.23.030, which prohibits any municipal officer from being ". . . beneficially interested, directly or indirectly, in any contract which may be made by, through or under supervision of such officer, in whole or in part . . ."  Certainly, an issue of revenue obligations would be considered a  [[Orig. Op. Page 5]] "contract" under this statute.  Equally certainly, the district commissioners, district manager, and district auditor would be considered "municipal officers" within the intendment of RCW 42.23.030.  See, letter to the Honorable George F. Hanigan, dated January 22, 1971, copy enclosed.

             However, this statute would only invalidate a sale of public utility revenue obligations by a district to one of those officers of the district by, through, or under whose supervision (in whole or in part) the obligations might be issued; it would have no impact upon the validity of a sale to those "employees" of the district who could have had no such contact with the sales procedures.  Therefore, subject to the qualification that no sale may be made to the officers of a public utility district in violation of RCW 42.23.030, supra, we may also answer your second question in the affirmative.  A public utility district may, pursuant to an appropriate resolution based upon findings of benefit to the district, sell a portion of a particular issue of its revenue obligations to its employees at a rate of interest less than that offered to nonemployee purchasers so long as the employee purchasers are not officers of the district by, through, or under whose supervision the utility revenue obligations in question may have been issued.

           We trust that the foregoing will be of assistance to you.

 Very truly yours,

 SLADE GORTON
Attorney General

 DONALD FOSS, JR.
Assistant Attorney General

                                                          ***   FOOTNOTES   ***

 1/See, e.g., RCW 39.44.030.

 2/Accord, AGO 61-62 No. 19 (copy enclosed), dealing with the sale of fire protection district bonds under RCW 52.16.110, a statute containing wording quite similar to that of RCW 54.24.060, supra.  See, also, Washington-Oregon Corporation v. Chehalis, 76 Wash. 442, 136 Pac. 681 (1913), cited and discussed therein.

 3/See, § 1, chapter 56, Laws of 1970, Ex. Sess., (uncodified) providing as follows:

            "Because market conditions are such that the state, state agencies, state colleges and universities, and the political subdivisions, municipal corporations and quasi municipal corporations of this state are finding it increasingly difficult and, in some cases, impossible to market bond issues and all other obligations, at the maximum permissible rate of interest payable on such bonds and obligations, it is the purpose of this ((1969)) 1970 amendatory act to ((increase the permissible maximum rate of interest payable on such bonds to eight percent per annum)) remove all maximum rates of interest payable on such bonds and obligations."