What Can Washington Issuers Invest Bond Proceeds In? RCW 39.59 and 39.53

Washington issuers invest bond proceeds under several statutes: chapter 39.59 RCW carries a general list of authorized investments for local governments, chapter 39.53 RCW confines refunding proceeds to government obligations, RCW 35.39.030 lists investments for cities' and towns' inactive or excess funds, and chapter 43.250 RCW runs the State Treasurer's investment pool.

This page is Washington's entry in mGIC's guide to permitted investments by state, with each statute stated together with its own conditions.

The instrument-level background is on the permitted investments page.

Which Washington statutes govern bond-proceeds investments?

For the funds they reach, the statutes are chapter 39.59 RCW, chapter 39.53 RCW, RCW 35.39.030 and chapter 43.250 RCW, and each covers a different set of entities and funds.

Chapter 39.59 reaches across Washington public entities: RCW 39.59.010(2) defines a local government to include any public corporation, authority or other instrumentality created by a county, city or district.

The coverage gap matters as much as the coverage: a search of the full text of RCW 39.46 found no investment provision, and the sources reviewed for this page identify no Washington statute that lists permitted investments for new-money bond proceeds generally.

What is on Washington's permitted investment list?

RCW 39.59.040 authorizes Washington local governments to invest in Washington state and local bonds, other states' general obligation bonds that carry one of the three highest ratings when bought, United States obligations and certain agency obligations, U.S.-dollar supranationals, registered warrants of a same-county local government, and secondary-market bankers' acceptances, commercial paper and corporate notes, each under the condition the statute attaches to it.

The chapter states the list at RCW 39.59.040(1) through (8), and the table shows the conditions this page states, leaving the other entries to the statute's text.

Cities and towns have their own list in RCW 35.39.030, which addresses a city's inactive or excess funds and allows United States bonds and certificates of indebtedness, Washington State bonds, the city's own or other Washington cities' general obligation or utility revenue bonds, and any other investment authorized by law for other taxing districts.

What do Washington statutes say about GICs, repos and investment agreements?

Chapter 39.59 names no guaranteed investment contract, repurchase agreement or money market fund, and that silence describes its list rather than deciding the question.

Refunding proceeds are the funds with a written rule: RCW 39.53.060 provides that refunding bond proceeds, together with other funds set aside to pay the refunded bonds, "may be invested and reinvested only in government obligations" that mature, or carry guaranteed redemption prices at the option of the holder, at the times the refunding plan requires.

The definition behind that limit, at RCW 39.53.010(4), covers direct or unconditionally guaranteed United States obligations and bank certificates of deposit secured by them, obligations of the banks for cooperatives, the federal intermediate credit bank, the FHLB system, the Export-Import Bank, the federal land banks and FNMA, public housing bonds and project notes secured by United States contracts, and obligations of FDIC or FSLIC insured institutions to the extent insured.

That definition does not name investment agreements, and its insured-institution category counts only to the extent insured, so a Washington refunding escrow reads against a tighter text than a construction fund does, as the refunding escrow guide explains.

For other funds, the sources reviewed for this page give reference points rather than a rule: the MSRB glossary defines permitted investments by reference to the bond contract, and RCW 39.59.020(2) leaves a local government's other specific authority unrestricted.

Whether a guaranteed investment contract, a full-flex repurchase agreement or a money market fund fits a particular Washington fund is a conclusion for the issuer's bond counsel, and the guaranteed investment contract, full-flex repurchase agreement and money market funds pages describe each instrument.

What rating and collateral requirements apply?

One rating condition is at RCW 39.59.040(2): a local government may buy another state's or its local governments' general obligation bonds only if, when bought, they hold one of the three highest ratings from a nationally recognized agency.

The supranational entry at RCW 39.59.040(4) carries an ownership test instead of a rating test, requiring at the time of investment that the U.S. government be the institution's biggest shareholder.

On the refunding side, RCW 39.53.010(4) admits obligations of insured institutions only to the extent insured, which is a limit inside the government-obligations definition rather than a collateral schedule.

Neither chapter 39.59, which does not address investment agreements, nor chapter 39.53, whose definition channels refunding escrows into government obligations, sets a collateralization percentage for them.

Where an issue's own documents do provide for an investment agreement, provider credit terms such as downgrade and collateral provisions may affect the yield or the cost of the investment, which is the test the Treasury regulation in the next section applies to material terms; the GIC credit protection guide takes up those terms.

Can Washington bond proceeds go into the state investment pool?

Washington's pool is the State Treasurer's public funds investment account, and RCW 43.250.040 lets a government finance official place funds into it for investment and reinvestment by the state treasurer when statute, ordinance, resolution or other official action authorizes the placement.

Those funds are invested under RCW 43.84.080 and chapter 39.58 RCW, and the statute says the treasurer invests to "effectively maximize the yield to the investment pool."

The MSRB glossary describes a local government investment pool as a pool established by a state or local governmental entity to invest the public funds of participating governmental units.

Chapter 43.250 draws its eligibility list at RCW 43.250.020(2): counties, cities, special purpose districts, state agencies, interlocal entities, and entities issuing bonds or certificates of participation for financing contracts approved under RCW 39.94.040.

The chapter treats funds as money not immediately required to meet current demands, and it makes the county treasurer the only government finance official for the agencies whose funds it has exclusive authority to invest.

RCW 43.250.060 directs the treasurer to set time periods, withdrawals and expenses paid from earnings by rule, RCW 43.250.070 requires a separate account and monthly report per participant, and RCW 43.250.080 requires an annual summary to the governor, the state auditor and the Joint Legislative Audit and Review Committee.

Amendments in 2019 c 163 added separately managed accounts run by the treasurer under agreements with service charges, at RCW 43.250.150 through 43.250.200.

Chapter 43.250 contains no bond-proceeds-specific rule, so whether a particular bond fund may be placed in the pool is answered by the statute, ordinance or resolution behind that fund, a determination for the issuer's bond counsel.

The local government investment pool and state pool versus GIC guides take up the pool-versus-bid question, and current pool terms come from the State Treasurer rather than from this page.

What procurement rules apply when bidding the investment?

The statutes above govern what may be bought, and the bidding conditions this page describes come from the federal arbitrage regulations' fair market value safe harbor.

Treasury Regulation 1.148-5(d)(6)(iii) treats the purchase price of a GIC, or of an investment bought for a yield-restricted defeasance escrow, as fair market value on the purchase date if all of the safe harbor's requirements are met, and a bona fide solicitation under paragraph (A) is one of them.

Among the bona fide solicitation requirements, paragraph (A) calls for written bid specifications sent to potential providers on a timely basis, specifications that include all material terms, and only commercially reasonable terms, with electronic specifications permitted.

The regulation defines material directly: "A term is material if it may directly or indirectly affect the yield or the cost of the investment."

For yield-restricted defeasance escrows, the same regulation adds a timing condition: the hold-firm period stated in the specifications must be no longer than reasonably required.

What those conditions mean for a live solicitation is covered in the bid specifications and fair market value safe harbor guides.

Refundings add named roles: GFOA describes an escrow agent, typically a commercial bank, that holds the escrow investments, a verification agent, typically a CPA firm, that confirms the escrow is sufficient and, where yield is limited, that its yield does not exceed the permitted yield, and an escrow bidding agent that solicits bids for open-market escrow securities.

GFOA notes that a municipal advisor, if engaged, may be able to act as the escrow bidding agent, one of the functions described in the Bidding Agent guide.

What representative transactions has mGIC executed in Washington?

None of the representative transactions mGIC names publicly is a Washington deal.

The public record is aggregate: mGIC has invested more than $60 billion in bond proceeds and executed swap notional in more than 1,000 transactions for issuers in more than 40 states.

The named transactions sit in other states and sectors, among them Pocahontas Parkway in Virginia, the Grand River Dam Authority in Oklahoma and Birmingham Water Works, listed by name only on the transactions pages.

mGIC is an independent, SEC-registered municipal advisor and Bidding Agent that helps issuers structure, competitively bid and close investments of bond proceeds, evaluating and bidding guaranteed investment contracts, full-flex repurchase agreements and structured Treasury portfolios without selling a proprietary investment product or acting as principal.

Its Bidding Agent work covers bid specifications, soliciting qualified providers, managing questions and comparing bids on rate and non-rate terms, and its fee is paid by the winning provider rather than the issuer.

Washington issuers who want to see how chapter 39.59, chapter 39.53 and their own bond documents line up for a specific fund can ask for Washington reinvestment help through a free, no-obligation review.

Final determinations about what the Washington statutes and an issue's bond documents permit belong to the issuer's bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.