HB 2804 — Addressing local government infrastructure.

ENGROSSEDH-4051.1HOUSE SUBSTITUTE HOUSE BILL 2804State of Washington66th Legislature2020 Regular SessionByHouseSessionByRepresentatives Local Government (originally sponsored by Representatives Duerr, Ryu, Pollet, Slatter, and Boehnke)READBoehnkeRead FIRSTfirst TIMEtime 02/07/20.AN01/22/20.Referred to Committee on Local Government.AN ACT Relating to local government infrastructure;

and amending RCW 39.104.020,39.104.020 39.104.100, and 82.14.510;39.104.100.BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:Sec.

adding a new section to chapter 39.104 RCW;

and providing an expiration date.BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:Sec.

For projects approved after January 1, 2021, the annual state contribution limit means up to fifteen million dollars statewide per fiscal year for no more than twentythirty years.(2) "Approving agency" means the department of revenue for project awards approved before June 9, 2016, and the department of commerce for project awards approved after June 9, 2016.(3) "Assessed value" means the valuation of taxable real property as placed on the last completed assessment roll.(4) "Bond" means a bond, a note or other evidence of indebtedness, including but not limited to a lease-purchase agreement or an executory conditional sales contract.(5) "Department" means the department of revenue.(6) "Fiscal year" means the twelve-month period beginning July 1st and ending the following June 30th.(7) "Local government" means any city, town, county, and port district.(8) "Local property tax allocation revenue" means those tax revenues derived from the receipt of regular property taxes levied on the property tax allocation revenue value and used for local revitalization financing.(9) "Local revitalization financing" means the use of revenues from local public sources, dedicated to pay the principal and interest on bonds authorized under RCW 39.104.110 and public improvement costs within the revitalization area on a pay-as-you-go basis, and revenues received from the local option sales and use tax authorized in RCW 82.14.510, dedicated to pay the principal and interest on bonds authorized under RCW 39.104.110.(10) "Local sales and use tax increment" means the estimated annual increase in local sales and use taxes as determined by the local government in the calendar years following the approval of the revitalization area by the department from taxable activity within the revitalization area.(11) "Local sales and use taxes" means local revenues derived from the imposition of sales and use taxes authorized in RCW 82.14.030.(12) "Ordinance" means any appropriate method of taking legislative action by a local government.(13) "Participating local government" means a local government having a revitalization area within its geographic boundaries that has taken action as provided in RCW 39.104.070(1) to allow the use of all or some of its local sales and use tax increment or other revenues from local public sources dedicated for local revitalization financing.(14) "Participating taxing district" means a taxing district that:(a) Has a revitalization area wholly or partially within its geographic boundaries;(b) Levies or has levied for it regular property taxes as defined in this section;

((or))(iii)or(iii) Historic preservation activities authorized under RCW 35.21.395;35.21.395.(19) "Real property" has the same meaning as in RCW 84.04.090 and also includes any privately owned improvements located on publicly owned land that are subject to property taxation.(20)(a) "Regular property taxes" means regular property taxes as defined in RCW 84.04.140, except:

or(iv) Relocation and construction of a state-owned facility, with written permission from the state agency owning the facility and the office of financial management.(19) "Real property" has the same meaning as in RCW 84.04.090 and also includes any privately owned improvements located on publicly owned land that are subject to property taxation.(20)(a) "Regular property taxes" means regular property taxes as defined in RCW 84.04.140, except:

and(ii) Any other local revenues, except as provided in (b) of this subsection, including revenues derived from federal and private sources and amounts received by taxing districts as set forth by an interlocal agreement as described in RCW 39.104.060(4), which are dedicated for the payment of bonds under RCW 39.104.110 or public improvement costs within the revitalization area on a pay-as-you-go basis.(b) Revenues from local public sources do not include any local funds derived from state grants, state loans, or any other state moneys including any local sales and use taxes credited against the state sales and use taxes imposed under chapter 82.08 or 82.12 RCW.(22) "Revitalization area" means the geographic area adopted by a sponsoring local government and approved by the approving agency, from which local sales and use tax increments are estimated and property tax allocation revenues are derived for local revitalization financing.(23) "Sponsoring local government" means a city, town, county, or any combination thereof, that adopts a revitalization area.(24) "State contribution" means the lesser of:(a) ((FiveFive hundred thousand dollars;(b)))dollars;(b) The project award amount approved by the approving agency as provided in RCW 39.104.100 or 82.14.505;

or(((c)))(b)or(c) The total amount of revenues from local public sources dedicated in the preceding calendar year to the payment of principal and interest on bonds issued under RCW 39.104.110 and public improvement costs within the revitalization area on a pay-as-you-go basis.

Revenues from local public sources dedicated in the preceding calendar year that are in excess of the project award may be carried forward and used in later years for the purpose of this subsection (24)(((c)))(b).(25)(24)(c).(25) "State property tax increment" means the estimated amount of annual tax revenues estimated to be received by the state from the imposition of property taxes levied by the state for the support of common schools under RCW 84.52.065 on the property tax allocation revenue value, as determined by the sponsoring local government in an application under RCW 39.104.100 and updated periodically as required in RCW 82.32.765.(26) "State sales and use tax increment" means the estimated amount of annual increase in state sales and use taxes to be received by the state from taxable activity within the revitalization area in the years following the approval of the revitalization area as determined by the sponsoring local government in an application under RCW 39.104.100 and updated periodically as required in RCW 82.32.765.(27) "State sales and use taxes" means state retail sales and use taxes under RCW 82.08.020(1) and 82.12.020 at the rate provided in RCW 82.08.020(1), less the amount of tax distributions from all local retail sales and use taxes, other than the local sales and use taxes authorized by RCW 82.14.510 for the applicable revitalization area, imposed on the same taxable events that are credited against the state retail sales and use taxes under RCW 82.08.020(1) and 82.12.020.(28) "Taxing district" means a government entity that levies or has levied for it regular property taxes upon real property located within a proposed or approved revitalization area.NEWarea.Sec. SECTION.  Sec.

A new section is added to chapter 39.104 RCW to read as follows:(1) The joint legislative audit and review committee must study the effectiveness of the state contribution under RCW 39.104.100 and 82.14.510, and submit a report as provided in subsection (3) of this section.(2) The report must include an assessment of:(a) Whether new sales tax revenue realized due to projects funded in part by the state contribution exceeded the state contribution;(b) Whether elements of the project would not have happened but for the state contribution and local revitalization financing;(c) Whether new construction and business openings that have occurred in the revitalization area would have not occurred elsewhere in the state in the absence of the state contribution and local revitalization financing;(d) Whether projects that received a state contribution accelerated cleanup and redevelopment of brownfields, including those for which the state is a potentially liable person, as defined in RCW 70.105D.020;

and(e) Whether, on a project-by-project basis, the projects awarded a state contribution are satisfying the criteria under RCW 39.104.100 for which the award was made.(3) By December 1, 2025, and in compliance with RCW 43.01.036, the joint legislative audit and review committee must submit to the appropriate committees of the legislature a final report with its findings and recommendations under this section.(4) This section expires December 31, 2025.Sec.

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((and))(((vii)))(viii)and(((vii)))(viii) The anticipated date when bonds under RCW 39.104.110 will be issued;issued.(b) The approving agency must make available electronic forms to be used for this purpose.

and(ix) Documentation demonstrating that the sponsoring local government has an agreement on how formal consultation will proceed, if the application is approved, with the federally recognized Indian tribe or tribes with cultural or treaty interests in the area when the project may involve archaeological, cultural, natural resource sites of significance to the tribe, or other treaty reserved rights or interests.

This consultation is to supplement rather than replace tribal consultation under Executive Order 05-05 or subsequent executive orders issued to protect cultural resources and treaty reserved rights or interests.(b) The approving agency must make available electronic forms to be used for this purpose.

The department of commerce must also provide to the department any information necessary to implement the tax authorized under RCW 82.14.510.(a) For project awards approved on and after January 1, 2021, the department of commerce shall use the following criteria to evaluate and make awards:(i) The project's potential to enhance the sponsoring local government's regional or international competitiveness;(ii) The project's ability to encourage mixed-use or transit-oriented development and the redevelopment of a geographic area;(iii) The project's ability to redevelop or utilize a sitebrownfield;(iv) which is a brownfield as defined in RCW 70.105D.020, with additional priority if the state may be a potentially liable person, as defined in RCW 70.105D.020, for such site;(iv) Achieving an overall distribution of projects statewide that reflect geographic diversity;(v) The estimated wages and benefits for the project are greater than the average labor market area;(vi) The estimated state and local net employment change over the life of the project;(vii) The estimated state and local net property tax change over the life of the project;(viii) The estimated state and local sales and use tax increase over the life of the project;(ix) The speed at which the project can begin construction;(x) The extent to which the project leverages nonstate funds;(xi) The likelihood that the project would proceed forward without the use of state funds;

and(xii)and(xi) ForThe projectslikelihood involvingthat the constructionproject ofwould newproceed housing,forward whetherwithout atthe leastuse twenty-five percent of newstate unitsfunds.(b) willState befunding affordable for thosethe makingprojects lessapproved thanunder eightythis percentsection ofis theprovided medianthrough incomea incredit against the sponsoringstate localsales government'sand jurisdiction.use tax.

ForThe projectsmaximum involvingstate existingcontribution affordablea housing,sponsoring whetherlocal anygovernment such housing may bereceive losteach asyear partis oflimited to the project,lesser and whether, if a loss of affordableone housingmillion maydollars occur,per theyear sponsoringfor localtwenty governmentyears; has a plan to mitigate such losses.

Foreight thehundred purposesthousand ofdollars thisper subsection,year "affordable" means that monthly rent for thetwenty-five unityears; will be no more than twenty-four percent of the median income in the sponsoring local government's jurisdiction until all general obligation bonds issued under RCW 39.104.110 are retired.(b) State funding for the projects approved under this section is provided through a credit against the state sales and use tax.

Theor maximumsix statehundred contributionsixty-five athousand sponsoring local government may receive each year is limited to one million dollars per year for twentythirty years.(c) Projects must begin no later than December 31, 2026, to qualify to receive funding.Sec.funding.--- END ---

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RCW 82.14.510 and 2016 c 207 s 4 are each amended to read as follows:(1) Any city or county that has been approved for a project award under RCW 39.104.100 may impose a sales and use tax under the authority of this section in accordance with the terms of this chapter.

Except as provided in this section, the tax is in addition to other taxes authorized by law and must be collected from those persons who are taxable by the state under chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the taxing jurisdiction of the city or county.(2) The tax authorized under subsection (1) of this section is credited against the state taxes imposed under RCW 82.08.020(1) and 82.12.020 at the rate provided in RCW 82.08.020(1).

The department must perform the collection of such taxes on behalf of the city or county at no cost to the city or county.

The taxes must be distributed to cities and counties as provided in RCW 82.14.060.(3) The rate of tax imposed by a city or county may not exceed the lesser of:(a) The rate provided in RCW 82.08.020(1), less:(i) The aggregate rates of all other local sales and use taxes imposed by any taxing authority on the same taxable events;(ii) The aggregate rates of all taxes under RCW 82.14.465 and 82.14.475 and this section that are authorized but have not yet been imposed on the same taxable events by a city or county that has been approved to receive a state contribution by the department, the department of commerce, or the community economic revitalization board under chapter 39.104, 39.100, or 39.102 RCW;

and(iii) The percentage amount of distributions required under RCW 82.08.020(((5))) multiplied by the rate of state taxes imposed under RCW 82.08.020(1);

and(b) The rate, as determined by the city or county in consultation with the department, reasonably necessary to receive the project award under RCW 39.104.100 over ten months.(4) The department, upon request, must assist a city or county in establishing its tax rate in accordance with subsection (3) of this section.

Once the rate of tax is selected through the application process and approved under RCW 39.104.100, it may not be increased.(5)(a) Except as provided in (c) and (d) of this subsection, no tax may be imposed under the authority of this section before:(i) July 1, 2011;(ii) July 1st of the second calendar year following the year in which the application was approved under RCW 39.104.100;(iii) The state sales and use tax increment and state property tax increment for the preceding calendar year equal or exceed the amount of the project award approved under RCW 39.104.100;

and(iv) Bonds have been issued according to RCW 39.104.110.(b) The tax imposed under this section expires the earlier of the date that the bonds issued under the authority of RCW 39.104.110 are retired or ((twenty-five))twenty years after the tax is first imposed.(c) For a demonstration project described in RCW 82.14.505(1)(a) except as provided in (d) of this subsection (5), no tax may be imposed under the authority of this section before:(i) July 1, 2010;

and(ii) Bonds have been issued according to RCW 39.104.110.(d) The requirement to issue bonds in (a)(iv) or (c)(ii) of this subsection (5) does not apply to demonstration projects authorized by RCW 82.14.505(1)(a)(iii), or any city receiving a project award under RCW 39.104.100 of less than one hundred fifty thousand dollars.(6) An ordinance or resolution adopted by the legislative authority of the city or county imposing a tax under this section must provide that:(a) The tax will first be imposed on the first day of a fiscal year;(b) The cumulative amount of tax received by the city or county, in any fiscal year, may not exceed the amount approved by the department under subsection (10) of this section;(c) The department must cease distributing the tax for the remainder of any fiscal year in which either:(i) The amount of tax received by the city or county equals the amount of distributions approved by the department for the fiscal year under subsection (10) of this section;

or(ii) The amount of revenue distributed to all sponsoring and cosponsoring local governments from taxes imposed under this section equals the annual state contribution limit;(d) The tax will be distributed again, should it cease to be distributed for any of the reasons provided in (c) of this subsection, at the beginning of the next fiscal year, subject to the restrictions in this section;

and(e) The state is entitled to any revenue generated by the tax in excess of the amounts specified in (c) of this subsection.(7) If a city or county receives approval for more than one revitalization area within its jurisdiction, the city or county may impose a sales and use tax under this section for each revitalization area.(8) The department must determine the amount of tax receipts distributed to each city and county imposing a sales and use tax under the authority of this section and must advise a city or county when tax distributions for the fiscal year equal the amount determined by the department in subsection (10) of this section.

Determinations by the department of the amount of tax distributions attributable to a city or county are not appealable.

The department must remit any tax receipts in excess of the amounts specified in subsection (6)(c) of this section to the state treasurer who must deposit the money in the general fund.(9) If a city or county fails to comply with RCW 82.32.765, no tax may be distributed in the subsequent fiscal year until such time as the city or county complies and the department calculates the state contribution amount according to subsection (10) of this section for the fiscal year.(10)(a) For each fiscal year that a city or county imposes the tax under the authority of this section, the department must approve the amount of taxes that may be distributed to the city or county.

The amount approved by the department under this subsection is the lesser of:(i) The state contribution;(ii) The amount of project award granted as provided in RCW 39.104.100;

or(iii) The total amount of revenues from local public sources dedicated or, in the case of carry forward revenues, deemed dedicated in the preceding calendar year, as reported in the required annual report under RCW 82.32.765.(b) A city or county may not receive, in any fiscal year, more revenues from taxes imposed under the authority of this section than the amount approved annually by the department.(11) The amount of tax distributions received from taxes imposed under the authority of this section by all cities and counties is limited annually to not more than the amount of annual state contribution limit.(12) The definitions in RCW 39.104.020 apply to this section subject to subsection (13) of this section and unless the context clearly requires otherwise.(13) For purposes of this section, the following definitions apply:(a) "Local sales and use taxes" means sales and use taxes imposed by cities, counties, public facilities districts, and other local governments under the authority of this chapter, chapter 67.28 RCW, or any other chapter, and that are credited against the state sales and use taxes.(b) "State sales and use taxes" means the taxes imposed in RCW 82.08.020(1) and 82.12.020.--- END ---