OFFICES AND OFFICERS ‑- COUNTY ‑- TREASURER ‑- MUNICIPALITIES ‑- FUNDS ‑- INVESTMENT OF SURPLUS FUNDS

OFFICES AND OFFICERS ‑- COUNTY ‑- TREASURER ‑- MUNICIPALITIES ‑- FUNDS ‑- INVESTMENT OF SURPLUS FUNDS

(1) The governing body of a municipal corporation whose funds are in the custody of a county treasurer may not authorize such treasurer, by a single blanket resolution, to invest all of its present and future surplus funds in a certain specified way or ways, and thus avoid having those funds invested as county residual funds under the second paragraph of RCW 36.29.020.

(2) The governing body of a municipal corporation may enact a blanket ordinance or resolution permitting either a single member of that body or some other officer or employee thereof to authorize the county treasurer having custody of its funds to invest those funds as and when indicated, provided that the ordinance or resolution contains sufficient standards to guide that officer or employee in the exercise of the power thus delegated.

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                                                              September 20, 1974

Honorable Patrick D. Sutherland
Prosecuting Attorney
Thurston County Court House
Olympia, Washington 98501

                                                                                                                 Cite as:  AGO 1974 No. 20

Dear Sir:

            By letter previously acknowledged you have requested the opinion of this office on two questions relating to the investment of surplus municipal funds under RCW 36.29.020.  We paraphrase those questions as follows:

            (1) May the governing body of a municipal corporation whose funds are in the custody of a county treasurer authorize such treasurer, by a single blanket resolution, to invest all of its present and future surplus funds in a certain specified way or ways, and thus avoid having those funds invested as county residual funds under the second paragraph of RCW 36.29.020?

             [[Orig. Op. Page 2]]

            (2) May the governing body of a municipal corporation enact a blanket ordinance or resolution permitting either a single member of that body or some other officer or employee thereof to authorize the county treasurer having custody of its funds to invest those funds as and when indicated?

            We answer question (1) in the negative and respond to question (2) as set forth in our analysis.

                                                                     ANALYSIS

            RCW 36.29.020 provides that:

            ". . .  Any municipal corporation may by action of its governing body authorize any of its funds which are not required for immediate expenditure, and which are in the custody of the county treasurer or other municipal corporation treasurer, to be invested by such treasurer in . . ."

            certain designated classes of investment deposits or government securities.  In order to compensate the investing treasurer for this service, the statute then goes on to provide that:

            ". . .  Five percent of the interest or earnings, with an annual minimum of ten dollars or annual maximum of fifty dollars, on any transactions authorized by each resolution of the governing body shall be paid as an investment service fee to the office of the county treasurer or other municipal corporation treasurer when the interest or earnings become available to the governing body."

            Finally, as amended by chapter 173, Laws of 1967, this statute takes cognizance of the possible existence of surplus municipal funds in the custody of a county treasurer with respect to which no investment authorization has been given by the municipal governing body.  As to these funds, the statute now1/ provides:

             [[Orig. Op. Page 3]]

            "Whenever the funds of any municipal corporation which are not required for immediate expenditure are in the custody or control of the county treasurer, and the governing body of such municipal corporation has not taken any action pertaining to the investment of any such funds, the county finance committee shall direct the county treasurer to invest, to the maximum prudent extent, such funds or any portion thereof in certificates, notes, or bonds of the United States, or other obligations of the United States or its agencies, or of any corporation wholly owned by the government of the United States, in federal home loan bank notes and bonds, federal land bank bonds and federal national mortgage association notes, debentures and guaranteed certificates of participation, or the obligations of any other government sponsored corporation whose obligations are or may become eligible as collateral for advances to member banks as determined by the board of governors of the federal reserve system or deposit such funds or any portion thereof in investment deposits as defined in RCW 39.58.010 secured by collateral in accordance with the provisions of chapter 193, Laws of 1969 ex. sess.:  PROVIDED, That the county treasurer shall have the power to select the specific qualified financial institution in which said funds may be invested.  The interest or other earnings from such investments or deposits shall be deposited in the current expense fund of the county and may be used for general county purposes.  The investment or deposit and disposition of the interest or other earnings therefrom authorized by this paragraph shall not apply to such funds as may be prohibited by the state Constitution from being so invested or deposited."

            Question (1):

            Your first question asks, in effect, whether the governing  [[Orig. Op. Page 4]] body of a municipal corporation, by a single resolution, may authorize a county treasurer to invest all present and future surplus funds of that municipal corporation in a certain way or ways and thus avoid the investment of such funds by the county treasurer as county residual funds for the benefit of the county.  We answer this question in the negative.

            To the extent that RCW 36.29.020, supra, is ambiguous on the question, we must construe it insofar as possible to effectuate the intention of the legislature.  State v. Lee, 62 Wn.2d 228, 382 P.2d 491 (1963); Alderwood Water Dist. v. Pope & Talbot, 62 Wn.2d 319, 382 P.2d 639 (1963).

            This statute, as above quoted, contemplates and directs two alternative courses of action whereby municipal funds (other than county funds themselves) may be invested by a county treasurer having custody of such funds.  The first is premised upon "action" by the governing body of the municipality authorizing any of its surplus funds in the custody of the treasurer to be invested in a certain manner for the benefit of the "owning" municipality.  This approach, as provided for in the first paragraph of the statute, also calls for the payment of an investment service fee to the county as compensation for its treasurer's efforts, with an annual minimum and maximum to be placed ". . . on any transactions authorized by each resolution of the governing body . . ."  (Emphasis supplied.)  Thus, this portion of the statute appears to contemplate a periodic review of its funds and investments by each municipal corporation through its own governing body ‑ resulting in periodic investments authorized by separate and specific resolutions of that body.

            On the other hand, the second paragraph of RCW 36.29.020, supra, provides for an alternative course of action predicated upon the absence of such specific direction by the "owning" municipality.  This paragraph was obviously added to the statute by chapter 173, Laws of 1967,supra, to encourage the investment of surplus or residual funds of the various municipal corporations using the services of the county treasurer.  See, AGO 1967 No. 23 [[to Robert V. Graham, State Auditor on June 20, 1967]], copy enclosed.  As an incentive to such an investment and to discourage those funds being left to lie idle, the statute, in authorizing the investment of such funds by the treasurer in the absence of specific authorization by the municipal governing body, states that the interest or other earnings from such investments are to be deposited in the county current expense fund for general county purposes.

             [[Orig. Op. Page 5]]

            The purpose of this alternative procedure is clear.  The legislature in enacting it placed upon the county finance committee, as well as the county treasurer, certain investment duties which must logically impose financial burdens upon the county.  In order to comply with the statute, the county finance committee must make periodic searches of municipal fund balances to determine both the availability of surpluses and the "maximum prudent extent" to which such surpluses may be invested.  As compensation for these services, the legislature has provided that all earnings from such investments are to be retained by the county.  Accord, AGO 1967 No. 23, supra.

            If we were to conclude that a municipal corporation could satisfy its legal function under the first paragraph of the statute (that of directing the investment of its surplus funds) by a general resolution such as is contemplated by your first question, and thus prevent the county from investing those funds for its own benefit as "residual balances" under the second paragraph, one or more of the statute's basic purposes would be defeated.  First, the governing body of the municipality would thereby be permitted to shirk its evident responsibility for making periodic reviews of its own investments and fund balances and for acting wisely and diligently in directing the investment of such fund balances.  In addition, such a resolution would constitute, if not an abdication of those responsibilities, at least an attempt to impose them upon the county ‑ thus requiring the county treasurer both to ascertain the availability of surplus funds and to invest them on behalf of the municipality in question.  The effect would be to require the county treasurer to perform all of the functions and services which county officers are required to perform under the second paragraph of the statute, as above quoted, while denying the county the right to receive the investment earnings contemplated by that paragraph.

            With these considerations in mind, we therefore conclude that the term "action" as used in RCW 36.29.020 means a resolution by a governing body of a municipal corporation dealing with the investment of specific funds at a specific time.  In our opinion it does not mean a general resolution delegating blanket investment authority to the county treasurer.

             [[Orig. Op. Page 6]]

            Question (2):

            Having thus answered your first question in the negative we turn to your second, the essence of which is the extent of the investment authority under RCW 36.29.020 which may be delegated by a municipal governing body to a subordinate officer or employee.

            Obviously, RCW 36.29.020 requires a continual exercise of discretion on the part of the governing body of a municipal corporation in determining (1) to what extent and (2) in what manner its surplus funds are to be invested.  See, AGO 1972 No. 21 [[to R. Ted Bottiger, State Representative on September 14, 1972]], copy enclosed, discussing AGO 1967 No. 23,supra.  An ordinance fixing no guide or rule whatever for the exercise of administrative discretion, leaving the whole matter to be determined by another officer or board, has generally been held by the courts to constitute an unwarranted delegation of powers.  See, 2 McQuillin, Municipal Corporations, § 1040, and cases cited.  However, the question as to whether a power has been unlawfully delegated depends upon whether the delegating body has "itself established the standards of legal obligation, thus performing its essential legislative function or by the failure to annex that standard has attempted to transfer that function."  Schechter v. United States, 295 U.S. 495, 79 L.Ed. 1570, 55 S.Ct. 837 (1935).  Therefore, in order to determine whether or not a particular delegation of authority is proper it is necessary to ascertain what standards have been fixed by the delegating body as guidelines for the exercise of the delegated power by the subordinate officer or board to which it has been delegated.