SCHOOL DISTRICTS ‑- REAL PROPERTY ‑- PURCHASE ON INSTALLMENT PLAN

SCHOOL DISTRICTS ‑- REAL PROPERTY ‑- PURCHASE ON INSTALLMENT PLAN

A school district which has an indebtedness in excess of one and one‑half per cent of the last assessed valuation of property in the district cannot purchase real property on an installment contract without prior approval of the electors of the district.

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                                                               November 26, 1957

Honorable Lloyd J. Andrews
Superintendent of Public Instruction
Old Capitol Building
Olympia, Washington                                                                                                              Cite as:  AGO 57-58 No. 136

Attention:  !ttMr. G. W. Van Horn, Consultant

            on Administrative Problems

Dear Sir:

            This is in answer to your request for an opinion of this office on a question which we paraphrase as follows:

            May a school district enter into an agreement with the federal government to acquire federal surplus real property for use as a schoolhouse site on the "deferred use plan"?

            The answer to your question is contained in the analysis.

                                                                     ANALYSIS

            The "deferred use plan" is an agreement wherein the school district agrees to purchase property and to pay the fair market value of the property in  [[Orig. Op. Page 2]] twenty equal annual installments, together with interest on the deferred balance at the rate of five per cent per annum.

            RCW 39.36.020 restricts the indebtedness of a school district as follows:

            "No taxing district shall for any purpose become indebted in any manner to an amount exceeding one and one‑half percent of the last assessed valuation of the taxable property in such taxing district, without the assent of three‑fifths of the voters therein voting at an election to be held for that purpose, nor in cases requiring such assent shall the total indebtedness at any time exceed five percent of the last assessed valuation of the taxable property in such taxing district.

            ". . .Provided further, That any school district may become indebted to a larger amount but not exceeding five percent additional for capital outlays."  Cf. Amendment 27 (Article VIII, § 6), Washington State Constitution.

            Under the constitutional and statutory provisions restricting the indebtedness of a school district, a contract payable in yearly installments constitutes apresent indebtedness in the amount of the total contract price, rather than an indebtedness in the amount of the installment payment currently due.  (See the opinion of the attorney general to the prosecuting attorney, Skagit County, dated June 29, 1931) Cf.State ex rel. Washington Building Financing Authority v. Yelle, 47 Wn. (2d) 705.  Consequently, the school district will incur an indebtedness in the amount of the total contract price if it enters into an agreement under the "deferred use plan."

            A further observation is necessary with respect to the laws governing school district budgets.  RCW 28.58.130 provides that:

            "It shall be unlawful for any board of directors to contract indebtedness against its district in any one year in any sum in excess of the aggregate amount set forth and approved in its final budget. . . ."

            Since under the "deferred use plan" the district incurs a present indebtedness in the full amount of the contract price rather than an indebtedness in the  [[Orig. Op. Page 3]] amount of the installment currently due, the total contract price must be budgeted for the year the agreement is entered into.

            We have been informed that the school district has an existing indebtedness in excess of one and one‑half percent of the last assessed valuation of the taxable property in the district.  Consequently, if the school district desires to purchase the property, it must either (1) budget and pay for the property from current revenue in the year in which the contract to purchase is entered into, or (2) it must secure approval of the electors of the district for the incurring of an indebtedness in excess of the one and one‑half percent limitation imposed by RCW 39.36.020 and the 27th Amendment to the State Constitution in the manner provided by law.

            The method provided by law for securing approval of the voters to exceed the one and one‑half percent indebtedness limitation is contained in RCW 28.51.010.  This statute permits a school district to incur an indebtedness and issue bonds when authorized by the voters for the purpose of securing funds to purchase a schoolhouse site.

            We conclude that a school district which has an existing indebtedness in excess of one and one‑half percent of the last assessed valuation of the taxable property in the district cannot purchase real property under the "deferred use plan" without prior approval of the electors of the district.

            We trust the above information will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

ELVIN J. VANDEBERG
Assistant Attorney General