AGO 1950 No. 255 - Apr 13 1950
COUNTY ROAD BONDS ‑- RETIREMENT
County road bonds retirement and interest may be effected by use of proceeds of ten mill levy and gas tax refund.
Property tax levy not necessary unless shortage in funds during last five years prior to bond maturity.
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April 13, 1950
Honorable R. F. Buck
San Juan County
Friday Harbor, Washington Cite as: AGO 49-51 No. 255
This is in answer to your letters of March 1 and 10, 1950, in which you request our opinion on the following questions:
1. Is it mandatory when issuing county road bonds to make an annual property tax levy for their retirement and interest?
2. May funds from sources other than property taxes be used for retirement and interest on county road bonds?
Our conclusions are as follows:
1. A road bond sinking fund is a proper item of a county budget and may include county road funds from any source including gas tax refunds as long as the statutory budget procedures are followed.
2. Interest due on county road bonds must be budgeted annually, but no levy is necessary if sufficient funds are available from other sources.
3. No levy for the retirement of county road bonds is necessary until five years before bonds become due, and then only to the extent that it appears that the sinking fund will be insufficient to retire the bonds.
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You advise that San Juan County desires to issue road bonds under the provisions of chapter 25, Laws of 1913 (Rem. Rev. Stat. 5594 to 5598). If possible, the county wants to finance the bond issue without resorting to an additional tax levy. The commissioners proposed to establish a sinking fund comprised of monies from the current county road levy and gas tax refunds.
Section 3, chapter 25, Laws of 1913 (Rem. Rev. Stat. 5594) concerns the retirement of county road bonds. It reads in part as follows:
"The county commissioners must ascertain and levy annually a tax sufficient to pay the interest on all such bonds whenever the same becomes due. At least five years prior to the maturity of such bonds and thence forward in each year until their maturity, the county commissioners must ascertain and levy a tax sufficient to accumulate during such series of years a fund equal to the principal sum of all such bonds then remaining outstanding and unpaid, and the amount of such tax as collected shall be by the county treasurer credited to special fund * * * which shall be designated 'Road Bonds of . . . . . . Sinking Fund' * * * and no part of said fund shall be diverted to any other purpose than the payment of such principal * * *"
Section 6 of the same act reads as follows:
"This act shall not be construed as repealing or affecting any other act relating to the issuance of bonds for road or other purposes, but shall be construed as conferring additional power and authority: * * *"
At the time this act was passed, general tax levies were the major, if not the sole, source of county road revenue. The act itself does not purport to furnish an exclusive method for financing county road bonds. To reach a satisfactory solution we must examine chapter 187, Laws of 1937, which provides for state aid to counties for road [[Orig. Op. Page 3]] purposes and contains a new budget law for county road funds.
Sections 7 and 8 of the 1937 act (Rem. Rev. Stat. 6450-7 and 6450-8) provide that the proceeds of county road levies, not to exceed ten mills and credits from the state motor vehicle fund shall be deposited in county road funds to be expended for county road purposes as provided in the act.
Section 53 (Rem. Rev. Stat. 6450-53) authorizes the use of county road funds for bond retirement and interest as follows:
"* * * For the purpose of this act, the payment of interest or principal on general obligation county road bonds, or independent highway district bonds or retirement of registered warrants both as to principal and interest when such warrants have been issued for a proper county road purpose, are hereby declared to be a proper county road purpose;"
Sections 54 to 58 (Rem. Rev. Stat. 6450-54 to 58) govern the budget procedure for county road funds. This procedure must be followed in appropriating county road funds. Section 56 (Rem. Rev. Stat. 6450-56) requires budgets to be itemized as follows: (1) overhead and operations; (2) bond and warrant retirement; (3) maintenance; (4) construction. The county road budget provided for in the 1937 act is complete and exclusive. Both interest and the bond sinking fund must be serviced through item (2) above.
We can find no authorization for transfer of funds from other budget items to item (2) by resolution of the commissioners after the budget is finally adopted. However, it would seem proper to appropriate any surplus from the previous year to the sinking fund or for interest if desired, and permitted by the proposed expenditures for the following year.
We are unable to find any provision, however, requiring a general tax levy to be made for that purpose, except during five years prior to bond maturity and then such procedure is mandatory only if it appears that the sinking fund will be insufficient to redeem the bonds.
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From the foregoing we must conclude that county road bonds may be financed by any monies in the county road fund, providing proper budget procedure is followed. No tax levy need be made for bond interest or retirement purposes if sufficient funds are available from other sources.
Yours very truly,
JAMES M. MORRIS
Assistant Attorney General