BONDS ‑- ADVANCE REFUNDING ‑- INVESTMENT OF PROCEEDS ‑- ROUNDING OUT MATURITIES
In establishing the principal amounts of annual maturities for advance refunding bonds issued to refund voted general obligation bonds, under RCW 39.53.090, the issuer may increase the principal amount of any maturity above the level of the corresponding maturity of the issue to be refunded where the combined estimated principal and interest requirements for such maturity year of the refunding bonds, including such increased principal amount, will not exceed the combined principal and interest requirements for the corresponding maturity year of the bonds being refunded, and such maturity of the refunding bonds may be further increased in order to round it out to the nearest $5,000.
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September 26, 1974
Honorable James E. Carty
301 Court House
Vancouver, Washington 98660 Cite as: AGLO 1974 No. 81
This is written in response to your request for our opinion on the following question which we have modified by the bracketed addition:
"In establishing the principal amounts of annual maturities for advance refunding bonds issued to refund voted general obligation bonds, under RCW 39.53.090, may the issuer increase the principal amount of any maturity above the level of the corresponding maturity of the issue to be refunded where the combined estimated principal and interest requirements for such maturity year of the refunding bonds, including such increased principal amount, will not exceed the combined principal and interest requirements for the corresponding maturity year of the bonds being refunded, and may such maturity of the refunding bonds be [further] increased in order to round it out to the nearest $5,000?"
We answer this question in the affirmative for the reasons set forth in our analysis.
By its enactment of chapter 138, Laws of 1965, 1st Ex. Sess., now codified as chapter 39.53 RCW and denominated the "Refunding Bond Act," the legislature authorized to the state of Washington, together with its agencies, institutions, political subdivisions and municipal and quasi-municipal corporations, to provide for the issuance of refunding bonds, including a type [[Orig. Op. Page 2]] of such bonds known as "advance refunding bonds." In so doing the legislature provided, in § 10 of the act (now RCW 39.53.090) that:
"The various annual maturities of general obligation bonds issued to refund voted general obligation bonds shall not extend over a longer period of time than the bonds to be refunded. Such maturities may be changed in amount or shortened in term if the estimated respective annual principal and interest requirements of the refunding bonds, computed upon the anticipated effective interest rate the governing body shall in its discretion determine will be borne by such bonds, will not exceed the respective annual principal and interest requirements of the bonds being refunded: Provided, That the issuer may increase the principal amount of annual maturities for the purpose of rounding out maturities to the nearest five thousand dollars."
The issue raised by your request, in most basic terms, is the meaning and effect to be given to the proviso at the end of this statute. Without it, RCW 39.53.090 would seemingly authorize such upward changes in the principal amount of annual maturities of bonds issued to refund voted general obligation bonds as could be funded, along with the lower annual interest payments resulting from the refunding, with the same amount of money as was necessary to meet the combined annual principal and interest requiremnts of the bonds being refunded. Because the proviso is there, however, that "main rule" of the statute must be deemed to be modified or qualified in some respect. Accord, Monroe Etc. Co. v. Dept. Labor & Industries, 11 Wn.2d 636, 120 P.2d 466 (1941), and cases cited therein. The question is whether the proviso qualifies this prior authorization by permitting only such increases in the annual maturities of refunding bonds as are necessary to round out those maturities to the nearest five thousand dollars ‑ or whether, instead, it imparts a further authorization, over and above that contained in the enacting clause of the statute, to increase those annual maturities beyond the level of ". . . the respective annual principal and interest requirements of the bonds being refunded" where necessary so to round them out.
[[Orig. Op. Page 3]]
In AGLO 1974 No. 44 [[to Robert V. Graham, State Auditor on April 11, 1974 an Informal Opinion AIR-74544]], copy enclosed, which was written to the state auditor in April of this year, this office adopted the first, or narrower, of these two opposing views, saying:
"Under this statute, the issuer of general obligation bonds issued to refund voted general obligation bonds may only increase the principal amount of annual maturities over that of the bonds to be refunded for the purpose of rounding out maturities to the nearest five thousand dollars. Accordingly it would not be permissible, under this statute, for the issuer of advance refunding bonds to provide that annual bond principal maturities for the refunding bonds are to be greater in a given year by amounts of $5,000 or $10,000 than the bond principal maturities of the voted general obligation bonds being refunded for the same year."
Since then, however, we have had occasion to review and reconsider this answer. It is now our judgment that the better reasoned conclusion is to the contrary. In other words, we are now of the opinion that the purpose and effect of the proviso is not that of so limiting the authority of issuers of refunding bonds. Instead, it is to extend to them the additional authority, in those instances in which increased annual maturities within the level of the annual debt service requirements of the bonds being refunded would result in uneven or otherwise awkward dollar amounts, to further increase those maturities to the extent necessary to round them out to the nearest even five thousand dollars.
In explaining our reasons for this change of mind, we will first note and dispose of the question of whether, in the case of those local taxing districts governed by Article VII, § 2 of our state constitution, the view of RCW 39.53.090 which we here adopt is constitutionally permissible.1/ If such a taxing district were to increase [[Orig. Op. Page 4]] the annual maturities of its refunding bonds beyond the level permitted by the enacting clause of the statute in order to round out maturities to the nearest even five thousand dollars, and the bonds being refunded were payable out of excess property taxes as contemplated by subsection (b) of this constitutional provision, it will readily be seen the result could be an increase in annual excess levies ‑ to the extent necessary to cover this differential. And, since no additional vote of the people is required for the issuance of bonds under provisions of the Refunding Bond Act, this increase in excess levies could occur without the approval of the voters of the taxing district. Nonetheless, as a careful reading of the constitution itself will disclose, this result is expressly permitted by it.
As you know, Article VII, § 2 begins by establishing a specific limitation on the aggregate of all tax levies upon real and personal property which may be imposed by the state and all taxing districts situated therein (other than port or public utility districts) ‑ currently a limitation of one percent of the true and fair value of such property. See, Amendment 55, approved by the voters at the November, 1972, general election. Then, however, the section goes on to authorize certain exceptions to this limitation in the form of what are commonly referred to as excess levies ‑ with the approval of sixty percent of the voters of the taxing body involved who have cast their votes on the proposition. Such excess levies may either be authorized by the voters for a single year to fund any proper governmental activity of the taxing body, or they may be authorized over an extended period of time to fund debt service payments on general obligation bonds issued by it for capital purposes.
Finally, however, after so providing (and specifying the manner in which voter approval is to be granted for such continuing excess levies to fund general obligation bonds) this subsection of the constitution goes on to provide:
". . . That any such taxing district shall have the right by vote of its governing body to refund any general obligation bonds of said district issued for capital purposes only, and to provide for the interest thereon and amortization thereof by annual levies in excess of the tax limitation provided for herein, . . ." (Emphasis supplied.)
From this it follows that even without a second vote of the electors of a taxing district, such a district may, constitutionally, issue new bonds to refund previously voted [[Orig. Op. Page 5]] general obligation bonds and, in so doing, it may provide for the payment of those new bonds from excess property tax revenues. Therefore, it likewise follows that a reading of RCW 39.53.090, supra, as permitting the increased annual maturities of a given taxing district's refunding bonds ‑ together with accompanying interest requirements ‑ to exceed (in terms of debt service costs) those of the bonds being refunded will not produce an unconstitutional result even if this increased annual debt service is to be funded with increased annual excess levy revenues.
Of course, this conclusion by and of itself does not require a reversal of the position we expressed in AGLO 1974 No. 44, supra. It does, however, by rendering this broader reading of the statute possible, turn the question from one to be answered mainly on the basis of constitutional necessity to one of pure legislative intent. And this, in turn, calls for the application of certian other well-established rules of statutory construction ‑ the essence of which are well summarized in the following excerpt from State v. Rinkes, 49 Wn.2d 664, 667, 306 P.2d 205 (1957):
"A court may not place a narrow, literal, and technical construction upon a part only of a statute, and ignore other relevant parts. In the process of construction, the intention of the lawmakers must be extracted from a consideration of all of the provisions of the act. In re Cress, 13 Wn.(2d) 7, 15, 123 P.(2d) 767 (1942). Statutes are to be construed according to their evident intent and purpose. State v. Warburton, 97 Wash. 242, 247, 166 Pac. 615 (1917). The legislative intent must be gleaned from a consideration of the whole act, by giving effect to the entire statute and to every part thereof. State v. Houck, 32 Wn.(2d) 681, 684, 203 P.(2d) 693 (1949), and cases cited.
"Where an act has a doubtful or ambiguous meaning, it is the duty of the court to adopt a construction that is reasonably liberal, in furtherance of the obvious or manifest purpose of the legislature. Statutes in pari materia must be construed together. State v. Houck, supra, p. 684, and cases cited.
Unquestionably, the purpose of the proviso in RCW 39.53.090, supra, was to permit refunding bonds issued thereunder to be rounded off ‑ in terms of their annual maturities ‑ to the nearest $5,000 in order to conform with what we understand to be the long-standing practice throughout the [[Orig. Op. Page 6]] municipal bond market. In other words, recognizing that under the arithmetic of refunding a prior voter approved general obligation bond issue it is not only likely, but almost unavoidable, that those increased annual maturities fundable strictly within the limits of prior debt service will be uneven in amount ‑ notwithstanding that the bonds being refunded had annual maturities in even $5,000 increments in accordance with trade practice ‑ the legislature decided to provide for a similar, and consistent, rounding off of the annual maturities of the refunding bonds.
Having thus ascertained the purpose of this proviso the question becomes, in the last analysis, one of reason; i.e., whether it is nevertheless reasonable to attribute to the legislature an intent, in the absence of any constitutional necessity, to accomplish that purpose through a withdrawal of some portion of the authority previously granted by it ‑ rather than by means of a limited expansion of that authority. Had the legislature truly intended to limit the extent to which a taxing district could increase the annual maturities of its refunding bonds (as compared to those of the bonds being refunded) to such increases as are necessary to round them out to the nearest five thousand dollars even though such limited increases would not, necessarily, use up all of the revenues which otherwise would have gone to pay principal and interest on the refunded bonds, it seems to us that it most certainly could have expressed this intent by a simple enacting clause without any qualifying proviso. Simply stated, it would have had no need, if that was its intent, first to grant a greater power by the enacting clause and then, immediately, to withdraw a portion of it by a proviso.
From the foregoing discussion it will now readily be seen that no matter how one looks at it, there is really a word missing from the proviso to RCW 39.53.090 with which we are here concerned. The question is whether that missing word is "further," or "only"; i.e., should that proviso be read as saying:
". . . that the issuer may [further] increase the principal amount of annual maturities for the purpose of rounding out maturities to the nearest five thousand dollars"
or should it be read as saying:
". . . that the issuer may [only] increase the principal amount of annual maturities for the purpose of rounding out maturities to the nearest five thousand dollars."
[[Orig. Op. Page 7]]
For the reasons above explained, we now are of the opinion that the first of these two interpretations more accurately reflects the probable intent of the legislature than the second. Therefore, we overrule AGLO 1974 No. 44, supra, and answer your question, as set forth at the outset, in the affirmative.
We trust that the foregoing will be of some assistance to you.
Very truly yours,
PHILIP H. AUSTIN
Deputy Attorney General
*** FOOTNOTES ***
1/Cf., Soundview Pulp Co. v. Taylor, 21 Wn.2d 261, 150 P.2d 839 (1944), and cases cited therein for the proposition that where a statute is open to two constructions, one of which will render it constitutional and the other unconstitutional or open to grave doubt in this respect, the former construction and not the latter is to be adopted.