DISTRICTS ‑- SCHOOLS ‑- BONDS ‑- ISSUANCE BY CONSOLIDATED DISTRICT ‑- RETAINED BONDED INDEBTEDNESS OF COMPONENT DISTRICTS

DISTRICTS ‑- SCHOOLS ‑- BONDS ‑- ISSUANCE BY CONSOLIDATED DISTRICT ‑- RETAINED BONDED INDEBTEDNESS OF COMPONENT DISTRICTS

Under the constitution and statutes of this state the retained bonded indebtedness of school districts which consolidate must be considered in computing the bonding capacity of the new (consolidated) district.

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August 1, 1961

Honorable Cliff Yelle
State Auditor
Legislative Building
Olympia, Washington

Cite as: AGO 61-62 No. 50

Dear Sir:

             By letter previously acknowledged you requested an opinion of this office on a question which we paraphrase as follows:

             Under the constitution and statutes of this state is the retained bonded indebtedness of the component districts of a consolidated school district to be considered in determining the bonding capacity of the newly formed district?

             We answer this question in the affirmative.

ANALYSIS

             The facts giving rise to your request may be summarized as follows: Under the provisions of chapter 28.57 of the Revised Code of Washington [[chapter 28.57 RCW]], two school districts have voted to consolidate and at the same election each of the districts voted to retain its then existing bonded indebtedness. The newly consolidated district has recently voted to authorize the issuance of general obligation bonds payable out of excess levies. No question has been raised as to the validity of the procedure preceding the formation of the newly consolidated district. However, your office is interested in learning whether the consolidated district can disregard the existing bonded indebtedness of the component districts in determining the amount of bonds which now may be sold.

             In this state, the bonding capacity of a school district is limited to ten percent (10%) of the assessed value of the taxable property in the district. RCW 39.36.020 restricts the indebtedness of a school [[Orig. Op. Page 2]] district as follows:

"(1) No taxing district except cities and towns 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.

             We believe the specific question which you have presented was answered, in effect, by our court in the case of State ex rel. Zylstra v. Clausen, 66 Wash. 324, 326, 119 Pac. 797 (1911). In that case the court was concerned with the bonding capacity of a newly consolidated school district under Article VIII, § 6, of our constitution whichthen limited the indebtedness of a school district to five percent of the value of the taxable property in the district. The court said:

"The record discloses that if the bonds tendered the auditor were issued, their issuance would create an indebtedness on behalf of the consolidated district slightly in excess of three per centum of the taxable property therein, as shown by the last assessment for state and county purposes. It appears, also, that districts Nos. 6 and 7 had an indebtedness at the time of their consolidation exceeding two per centum of the taxable property therein, as shown by the last assessment for state and county purposes. As each member of the consolidated district retains its corporate existence for the purpose of paying its prior indebtedness, and is subject to taxation therefor as a separate entity (Rem. & Bal. Code, § 4446), it is plain that the issuance of the bond in question will create an indebtedness over this portion of the consolidated district exceeding the constitutional limitation of five per centum. It is for this reason that the auditor was advised to refuse to accept the bonds.

[[Orig. Op. Page 3]]

"The relators argue that the consolidation of several school districts is the creation of a new entity in nowise affected by the entities of which it is composed, and that its limitation of indebtedness is to be measured by the assessed value of the taxable property within its boundaries, regardless of the amount of indebtedness the entities of which it is composed had formerly incurred for like purposes. But this contention seems to us untenable. It is manifest that the constitution intended to limit the amount of indebtedness any particular territory could incur for school purposes to five per centum of the value of the taxable property therein, [now 10%, see Amendment 27,supra] to be ascertained by the last assessment for state and county purposes previous to the incurring of the indebtedness. To hold with the relators' contention would be to do away with the limitation entirely, as the legislature, by providing for successive reincorporations of the same territory, could create a new limitation whenever the existing limitation should be reached." (Emphasis supplied.)

             See, also, Paine v. Port of Seattle, 70 Wash. 294, 305, 320, 126 Pac. 628, 127 Pac. 580 (1912), and AGO No. 1828, written to the supervisor of municipal corporations, dated July 30, 1927 [[1927-28 OAG 137]].

             Based on the reasoning of the Zylster case, it is our opinion that the retained or existing bonded indebtedness of the component districts of a consolidated school district must be considered when computing the bonding capacity of the newly formed school district under RCW 39.36.020, supra, and Article VIII, § 6, Amendment 27.

             Likewise it should be noted that where the issuance of bonds payable out of excess levies will cause the forty mill limitation to be exceeded, compliance must be had with the 17th Amendment as well as Amendment 27. See, Henderson v. Tumwater, 46 Wn. (2d) 758, 285 P. (2d) 119 (1955), and AGO 59-60 No. 85 [[to Victor A. Meyers, Secretary of State on November 18, 1959]].

             In closing we should like to state that we have not overlooked the opinion of this office issued in 1954 (AGO 53-54 No. 338) [[to H. Hanson, State Representative on November 3, 1954]]. However since that opinion simply relates to the bonding capacity of a union high school district and we are here concerned with the bonding capacity of a consolidated school district, we see no need at this time to review the basis of our earlier opinion.

[[Orig. Op. Page 4]]

             We trust the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

ROBERT J. DORAN
Assistant Attorney General