The state plans its first-ever certificate of participation sale for equipment next week, and one state official said local governments may eventually use the financing tool as well.
Daniel Grimm, the state treasurer, said allowing municipalities to use COPs is an issue that warrants exploration.
"We try to give as much authority to local governments as possible," he said.
Other states have relied on certificates of participation for years, but the public finance tool is new for Washington, which is fast approaching its constitutional limit for general obligation debt.
Washington plans to sell a $40 million lease-purchase certificate deal on Nov. 19, marking the state's second certificate sale and the first time it has used such a financing for equipment. Washington's first lease financing earlier this year paid for a state office building.
About $18 million of next week's certificate proceeds will refinance existing lease arrangements for computer needs, a ferry, an airplane, and other equipment. The deal could save the state more than $300,000 over the life of the issue, said Tim Kerr, Washington's deputy state treasurer.
"Lease purchase is expected to be used again for equipment," said Mr. Grimm. "It is anticipated to be an ongoing part of our state debt management plan."
Washington's Legislature approved the use of certificates in 1989 and the state Supreme Court validated the financing method in 1991. Washington recently expanded the use of certificates with legislation that authorizes their issuance for higher education purposes.
Lease payments on the state certificates are subject to appropriation by the Legislature.
But the proposed certificates are different from many similar financings in California because the Washington COPs are not subject to the nonpayment risk known as abatement. This means that Washington is obligated to make debt service even if the equipment is damaged, noted David Thomson, first vice president of Grigsby Brandford Powell Inc., the senior manager on the issue.
