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AN ACT Relating to enterprise zones; amending RCW 43.155.070, 43.160.060, 43.168.050, 82.60.050, 82.61.040, 82.62.040, 82.60.020, 82.61.010, 82.61.070, and 82.62.010; adding a new section to chapter 82.04 RCW; adding new sections to chapter 43.31 RCW; adding a new section to chapter 43.63A RCW; adding a new section to chapter 50.08 RCW; adding a new chapter to Title 43 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that there are areas in the state that are characterized by very high levels of unemployment and poverty. Poverty and high unemployment levels negatively impact the health, safety, and welfare of the general public, particularly those persons residing in areas of high unemployment and poverty. The legislature finds that it is an important public purpose to stimulate the economy and create employment opportunities in areas with high unemployment and poverty. This act provides for the establishment of enterprise zones to stimulate the economy in these areas.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Department" means the department of community development.

(2) "Enterprise zone" means an area of the state certified by the department as an enterprise zone under this chapter.

(3) "Depressed area" means an area in which pervasive poverty, unemployment, and economic distress exist.

(4) "Designated zone organization" means an association or entity:

(a) The members of which are substantially all residents of the enterprise zone.

(b) The board of directors of which is elected by the members of the organization.

(d) Which exists primarily for the purpose of performing within the area or zone for the benefit of the residents and businesses thereof any of the functions set forth in this chapter.

(5) "Agency" means each officer, board, commission, and agency created by the Constitution, in the executive branch of state government, other than an election board, each officer, department, board, commission, agency, institution, authority, university, body politic and corporate of the state, and each administrative unit or corporate outgrowth of the state government that is created by or pursuant to statute, other than units of local government and their officers and school districts, and each administrative unit or corporate outgrowth of the entities listed in this subsection and as may be created by executive order of the governor. No entity shall be considered an "agency" for the purposes of this chapter unless authorized by law to make rules and regulations.

(6) "Rule" means each agency statement of general applicability that implements, applies, interprets, or prescribes law or policy, but does not include:

(a) Statements concerning only the internal management of an agency and not affecting private rights or procedures available to persons or entities outside the agency;

(b) Intra-agency memoranda; or

NEW SECTION. Sec. 3. An area is qualified to become an enterprise zone when it:

(1) Is a contiguous area, provided that a zone area may exclude wholly surrounded territory within its boundaries.

(2) Comprises a minimum of one-half square mile and not more than ten square miles in total area, exclusive of lakes and waterways.

(3) Is a depressed area.

(4) Satisfies additional criteria established by rule of the department consistent with the purposes of this chapter.

(5) Is entirely within a municipality or entirely within the unincorporated areas of a county, except where reasonable need is established for the zone to cover portions of more than one municipality or county.

NEW SECTION. Sec. 4. (1) No area may be designated as an enterprise zone except pursuant to an initiating ordinance adopted in accordance with this section.

(2) A county or municipality may by ordinance designate an area within its jurisdiction as an enterprise zone, subject to the certification of the department in accordance with this chapter, if:

(a) The area is qualified in accordance with section 3 of this act.

(b) The county or municipality has conducted at least one public hearing within the proposed zone area on the question of whether to create the zone, what local plans, tax incentives, and other programs should be established in connection with the zone, and what the boundaries of the zone should be. Public notice of the hearing shall be provided.

(i) A precise description of the area comprising the zone, either in the form of a legal description or by reference to roadways, lakes and waterways, and township county boundaries.

(ii) A finding that the zone area meets the qualifications of section 3 of this act.

(iii) Provisions for tax incentives or reimbursement for taxes, that pursuant to state and federal law apply to business enterprises within the zone at the election of the designating county or municipality, and that are not applicable throughout the county or municipality.

(iv) A designation of the area as an enterprise zone, subject to the approval of the department in accordance with this chapter.

(v) The duration or term of the enterprise zone.

(4) This section does not prohibit a municipality or county from extending additional tax incentives or reimbursement for business enterprises in enterprise zones or throughout their territory by separate ordinance.

NEW SECTION. Sec. 5. A county or municipality that has adopted an ordinance designating an area as an enterprise zone shall make written application to the department to have the proposed enterprise zone certified by the department as an enterprise zone. The application shall include:

(1) A certified copy of the ordinance designating the proposed zone.

(2) A map of the proposed enterprise zone, showing existing streets and highways.

(3) An analysis, and appropriate supporting documents and statistics, demonstrating that the proposed zone area is qualified in accordance with section 3 of this act.

(4) A statement detailing any tax, grant, and other financial incentives or benefits, and any programs, to be provided by the municipality or county to business enterprises within the zone, other than those provided in the designating ordinance, that are not to be provided throughout the municipality or county.

(5) A statement setting forth the economic development and planning objectives for the zone.

(6) A statement describing the functions, programs, and services to be performed by designated zone organizations within the zone.

(7) An estimate of the economic impact of the zone, considering all of the tax incentives, financial benefits, and programs contemplated, upon the revenues of the municipality or county.

(8) A summary of all public hearings on establishing the zone.

(9) In the case of a joint application, a statement detailing the need for a zone covering portions or more than one municipality or county and a description of the agreement between joint applicants.

(10) Additional information as the department by rule may require.

NEW SECTION. Sec. 6. (1) All applications that are to be considered and acted upon by the department during a calendar year must be received by the department no later than December 31st of the preceding calendar year.

An application received on or after January 1st of a calendar year shall be held by the department for consideration and action during the following calendar year.

(2) Upon receipt of an application from a county or municipality the department shall review the application to determine whether the designated area qualifies as an enterprise zone under section 3 of this act.

(3) No later than May 1st, the department shall notify all applicant municipalities and counties of the department's determination of the qualification of their respective designated enterprise zone areas.

(4) If a designated area is found to be qualified to be an enterprise zone, the department shall, no later than May 15th, publish a notice in at least one newspaper of general circulation within the proposed zone area to notify the general public of the application and their opportunity to comment. The notice shall include a description of the area and a brief summary of the application and shall indicate locations where the applicant has provided copies of the application for public inspection. The notice shall also indicate appropriate procedures for the filing of written comments from zone residents, business, civic, and other organizations and property owners to the department.

(5) By July 1st of each calendar year, the department shall either approve or deny all applications filed by December 31st of the preceding calendar year. If approval of an application filed by December 31st of any calendar year is not received by July 1st of the following calendar year, the application shall be considered denied. If an application is denied, the department shall inform the county or municipality of the specific reasons for the denial.

(6) In determining which designated areas shall be approved and certified as enterprise zones, the department shall give preference to:

(a) Areas with high levels of poverty, unemployment, job and population loss, and general distress.

(b) Areas which have evidenced wide support from the county or municipality seeking to have the areas designated as enterprise zones, by community residents, local business, labor, and neighborhood organizations and where there are plans for the disposal of publicly owned real property.

(c) Areas for which a specific plan has been submitted to effect economic growth and expansion and neighborhood revitalization for the benefit of zone residents and existing business through efforts that may include but need not be limited to a reduction of tax rates or fees, an increase in the level and efficiency of local services, and a simplification or streamlining of governmental requirements applicable to employers or employees, taking into account the resources available to the county or municipality seeking to have an area designated as an enterprise zone to make the efforts.

(d) Areas for which there is evidence of prior consultation between the county or municipality seeking designation of an area as an enterprise zone and business, labor, and neighborhood organizations within the proposed zone.

(e) Areas for which a specific plan has been submitted that will or may be expected to benefit zone residents and workers by increasing their ownership opportunities and participation in enterprise zone development.

(f) Areas in which specific governmental functions are to be performed by designated neighborhood organizations in partnership with the county or municipality seeking designation of an area as an enterprise zone.

(7) The department's determination of whether to certify an enterprise zone shall be based on the purposes of this chapter, the criteria set forth in section 3 of this act and subsection (6) of this section and additional criteria adopted by rule of the department under section 3(4) of this act.

NEW SECTION. Sec. 7. (1) Approval of designated enterprise zones shall be made by the department by certification of the designating ordinance. The department shall promptly issue a certificate for each enterprise zone upon its approval. The certificate shall be signed by the director of the department, shall make specific reference to the designating ordinance, which shall be attached thereto, and shall be filed in the office of the secretary of state. A certified copy of the enterprise zone certificate, or a duplicate original thereof, shall be recorded in the office of recorder of deeds of the county in which the enterprise zone lies.

(2) An enterprise zone shall be effective upon its certification. The department shall transmit a copy of the certification to the secretary of state and to the appropriate municipality or county.

Upon certification of an enterprise zone, the terms and provisions of the designating ordinance shall be in effect, and may not be amended or repealed except in accordance with section 8 of this act.

(3) An enterprise zone shall be in effect for twenty calendar years, or for a lesser number of years specified in the certified designating ordinance. Enterprise zones shall terminate at midnight of December 31st of the final calendar year of the certified term, except as provided in section 8 of this act.

(4) No more than eight enterprise zones may be certified by the department in a calendar year. In a calendar year, the department may not certify more than three zones located within the same county, whether within municipalities or within unincorporated territory, nor more than three zones in the same municipality. The department may certify enterprise zones in each of the six calendar years commencing with 1993. Thereafter, the department may not certify additional enterprise zones, but may amend and rescind certifications of existing enterprise zones in accordance with section 8 of this act.

NEW SECTION. Sec. 8. (1) The terms of a certified enterprise zone designating ordinance may be amended to:

(a) Alter the boundaries of the enterprise zone; or

(b) Limit or repeal tax incentives or benefits provided in the ordinance; or

(c) Alter the termination date of the zone, but the amendment shall not be effective unless the department issues an amended certificate for the enterprise zone, approving the amended designating ordinance. Upon the adoption of an ordinance amending or repealing the terms of a certified enterprise zone designating ordinance, the municipality or county shall promptly file with the department an application for approval thereof, containing substantially the same information as required for an application under section 5 of this act insofar as material to the proposed changes. The municipality or county must hold a public hearing on the proposed changes as specified in section 4 of this act.

(2) The department shall approve or disapprove a proposed amendment to a certified enterprise zone within ninety days of its receipt of the application from the municipality or county. The department may not approve changes in a zone that are not in conformity with this chapter, or with other applicable laws. If the department issues an amended certificate for an enterprise zone, the amended certificate, together with the amended zone designating ordinance, shall be filed, recorded, and transmitted as provided in section 7 of this act.

(3) An enterprise zone may be decertified by joint action of the department and the designating county or municipality in accordance with this section. The designating county or municipality shall conduct at least one public hearing within the zone prior to its adoption of an ordinance of dedesignation. The mayor of the designating municipality or the chair of the county board of the designating county shall execute a joint decertification agreement with the department. A decertification of an enterprise zone shall not become effective until at least six months after the execution of the decertification agreement, which shall be filed in the office of the secretary of state.

(4) In the event of a decertification, or an amendment reducing the length of the term or the area of an enterprise zone or the adoption of an ordinance reducing or eliminating tax benefits in an enterprise zone, all benefits previously extended within the zone pursuant to this chapter providing benefits specifically to or within enterprise zones shall remain in effect for the original stated term of the enterprise zone, with respect to business enterprises within the zone on the effective date of the decertification or amendment, and with respect to individuals participating in urban homestead programs under this chapter.

(5) With respect to business enterprises or expansions thereof, that are proposed or under development within a zone at the time of a decertification or an amendment reducing the length of the term of the zone, or excluding from the zone area the site of the proposed enterprise, or an ordinance reducing or eliminating tax benefits in a zone, the business enterprise shall be entitled to the benefits previously applicable within the zone for the original stated term of the zone, if the business enterprise establishes:

(a) That the proposed business enterprise or expansion has been committed to be located within the zone.

(b) That substantial and binding financial obligations have been made towards the development of the enterprise.

(c) That the commitments have been made in reasonable reliance on the benefits and programs that were to have been applicable to the enterprise by reason of the zone, including in the case of a reduction in term of a zone, the original length of the term.

In declaratory judgment actions under this subsection, the department and the designating municipality or county shall be necessary parties defendant.

NEW SECTION. Sec. 9. (1) The department shall administer this chapter and shall have the following powers and duties:

(a) To monitor the implementation of this chapter and submit annual reports evaluating the effectiveness of the program and suggestions for legislation to the governor and legislature by December 1st including initial and current population, employment, per capita income, corporate income, and housing start figures for each enterprise zone.

(b) To adopt all necessary rules to carry out the purposes of this chapter.

(2) Specific duties include:

(a) The department shall provide information and appropriate assistance to persons desiring to locate and engage in business in an enterprise zone, to persons engaged in business in an enterprise zone, and to designated zone organizations operating there.

(b) The department shall, in cooperation with appropriate units of local government and state agencies, coordinate and streamline existing state business assistance programs and permit and license application procedures for enterprise zone businesses.

(c) The department shall publicize existing tax incentives and economic development programs within the zone and upon request, offer technical assistance in abatement and alternative revenue source development to local units of government which have enterprise zones within their jurisdiction.

(d) The department shall work together with the responsible state and federal agencies to promote the coordination of other relevant programs, including but not limited to housing, community and economic development, small business, banking, financial assistance, and employment training programs which are carried on in an enterprise zone.

(e) In order to stimulate employment opportunities for zone residents, the department, in cooperation with the department of social and health services and the employment security department, is to initiate a test of the following two programs within the twelve-month period following designation and approval by the department of the first enterprise zones:

(i) The use of aid to families with dependent children benefits, general assistance benefits, the unemployment insurance benefits as training or employment subsidies leading to unsubsidized employment.

(ii) A program for voucher reimbursement of the cost of training zone residents eligible under provisions of the Internal Revenue Code for employment in private industry or other programs to provide additional training in the enterprise zone. These programs shall not be designed to subsidize businesses, but are intended to open up job and training opportunities not otherwise available. Nothing in this subsection (2)(e)(ii) shall be deemed to require zone businesses to utilize these programs. The programs should be designed:

(A) For those individuals whose opportunities for job-finding are minimal without program participation.

(B) To minimize the period of benefit collection by these individuals.

(C) To accelerate the transition of those individuals to unsubsidized employment. The department is to seek agreement with business, organized labor, and the appropriate state department and agencies on the design, operation, and evaluation of the test programs.

(f) A report with recommendations including representative comments of these groups shall be submitted by the department to the county or municipality which designated the area as an enterprise zone, the governor, and the legislature not later than twelve months after such test programs have commenced, or not later than three months following the termination of the test programs, whichever first occurs.

NEW SECTION. Sec. 10. (1) Priority in the use of industrial development bonds shall be given to businesses located in an enterprise zone.

(2) The state treasurer is authorized and encouraged to place deposits of state funds with financial institutions doing business in an enterprise zone.

NEW SECTION. Sec. 11. A business receiving assistance under chapter ..., Laws of 1993 (this act) shall seek to employ as many of its employees as possible from the enterprise zone the assistance is related to, with a minimum goal of at least thirty percent of the employees from the respective enterprise zone.

NEW SECTION. Sec. 12. The administration of an enterprise zone shall be under the jurisdiction of the designating municipality or county. Each designating municipality or county shall, by ordinance, designate a zone administrator for the certified zones within its jurisdiction. A zone administrator must be an officer or employee of the municipality or county. The zone administrator shall be the liaison between the designating municipality or county, the department, and designated zone organizations within zones under his or her jurisdiction.

A designating municipality or county may designate one or more organizations qualified under section 2(4) of this act to be designated zone organizations for purposes of this chapter. The municipality or county, may, by ordinance, delegate functions within an enterprise zone to one or more designated zone organizations in the zones.

Subject to the necessary governmental authorizations, designated zone organizations may provide the following services or perform the following functions in coordination with the municipality or county:

(1) Provide or contract for provision of public services including, but not limited to:

(a) Establishment of crime watch patrols within zone neighborhoods.

(b) Establishment of volunteer day care centers.

(d) Garbage collection.

(e) Street maintenance and improvements.

(f) Bridge maintenance and improvements.

(g) Maintenance and improvement of water and sewer lines.

(h) Energy conservation projects.

(i) Health and clinic services.

(j) Drug abuse programs.

(k) Senior citizen assistance programs.

(l) Park maintenance.

(m) Rehabilitation, renovation, and operation and maintenance of low and moderate-income housing.

(n) Other types of public services as provided by law or regulation.

(2) Exercise authority for the enforcement of a code, permit, or licensing procedure within an enterprise zone.

(3) Provide a forum for business, labor, and government action on zone innovations.

(4) Apply for regulatory relief as provided in this chapter.

(5) Receive title to publicly owned land.

(6) Perform other functions as the responsible government entity may deem appropriate, including offerings and contract for insurance with businesses within the zone.

(7) Agree with local governments to provide the public services within the zones by contracting with private firms and organizations, where feasible and prudent.

(8) Solicit and receive contributions to improve the quality of life in the enterprise zone.

NEW SECTION. Sec. 13. A new section is added to chapter 43.31 RCW to read as follows:

(1) The department shall conduct a review of state agency rules and shall identify those rules which preliminarily appear to the department to:

(a) Affect the conduct of business, industry, and commerce.

(b) Impose excessive costs on either the creation or conduct of the enterprises.

(2) The department shall conduct hearings, pursuant to public notice, to solicit public comment on agency rules as part of this review process.

(3) The department shall publish a list of rules. The department shall transmit a copy of the list to each agency that has adopted rules on the list.

(4) Within ninety days of the publication of the list by the department, each agency that adopted rules identified therein shall file a written report with the department detailing for each identified rule:

(a) The need or justification.

(b) Whether the rule is mandated by state or federal law, or is discretionary, and to what extent.

(d) An appropriate explanation of its relationship to other rule-making requirements.

The adopting agency shall also include available data, analysis, and studies concerning the economic impact of the identified rules. The agency responses shall be public records.

(e) The department shall file a request exempting business enterprises within enterprise zones from those agencies with rules contained in the published list, for which the department finds that the job creation or business development incentives for enterprise zone development engendered by the exemption outweighs the need and justification for the rule. In making its findings, the department shall consider all information, data, and opinions submitted to it by the public, as well as by adopting agencies, as well as information otherwise available to it.

(f) Upon its effective date, an exempting rule adopted by the appropriate state agency shall supersede the exempted agency rule in accordance with the terms of the exemption. The exemptions may apply only to business enterprises within enterprise zones during the effective term of the respective zones.

NEW SECTION. Sec. 14. (1) Agencies may provide in their rules and regulations for:

(a) The exemption of business enterprises within enterprises zones; or

(b) Modifications or alternatives specifically applicable to business enterprises within enterprise zones, which impose less stringent standards or alternative standards for compliance, including performance-based standards as a substitute for specific mandates of methods, procedures, or equipment.

The exemptions, modifications, or alternatives shall be effected by rule. The agency adopting the exemptions, modifications, or alternatives shall file with its proposed rule its findings that the proposed rule provides economic incentives within enterprise zones that promote the purposes of this chapter, and which, to the extent they include an exemption or reduction in rule-making standards or requirements, outweigh the need or justification for the existing rule.

(2) Within enterprise zones, the designating county or municipality may modify all local ordinances and rules regarding:

(a) Zoning.

(b) Licensing.

NEW SECTION. Sec. 15. (1) Sections 13 and 14(1) of this act do not apply to rules adopted pursuant to: Acts whose purpose is the protection of the environment, the preservation of historic places and landmarks, or the protection of persons against discrimination on the basis of race, color, religion, sex, martial status, national origin, or handicap.

(2) No exemption, modification, or alternative to an agency rule adopted under section 13 or 14 of this act shall be effective which:

(a) Presents a significant risk to the health or safety of persons residing in or employed within an enterprise zone;

(b) Would conflict with federal law or rule so that the state, or a unit of local government or school district, or an area of the state other than enterprise zones, or a business enterprise located outside of an enterprise zone would be disqualified from a federal program or from federal tax or other benefits;

(d) Would eliminate or reduce benefits to individuals who are residents of or employed within a zone.

NEW SECTION. Sec. 16. Once an area becomes an enterprise zone, under provisions contained in the enterprise zone agreement, the state and a county or municipality that owns unused structures or vacant land within the enterprise zone may dispose of the structure or vacant land in one of the following ways:

(1) Sell the structures or vacant land at public auction or by other methods available to dispose of the property; or

(2) Establish an urban homestead program that provides:

(a) That the state or county or municipality will sell an individual a residence or portion thereof it owns for a sum not to exceed one thousand dollars;

(b) That the individual agrees to live in the residence for a period of seven years;

(c) That the individual agrees to renovate or remodel the property to meet the level of maintenance stated in the agreement between the individual and the state or county or municipality;

(d) That the state, county, or municipality shall assign the property to the individual at the end of the seven-year residency requirement when satisfactory improvements to the property have been made; or

(e) Establish an urban shopstead program that provides:

(i) That the state, county, or municipality will sell to a designated zone organization a structure or portion thereof it owns for a sum not to exceed one thousand dollars;

(ii) That the designated zone organization agrees to renovate or remodel the property to meet the level of maintenance stated in the agreement between the individual and the state, county, or municipality;

(iii) That the state, county, or municipality shall assign the property to the designated zone organization when satisfactory improvements to the property have been made;

(iv) That the designated zone organization may sell or lease the structure to commercial or industrial businesses pursuant to procedures that shall be contracted in the agreement between the zone organization and the state or county or municipality. The zone organization may also retain the structure in whole or part of its own use. Proceeds derived from the use, lease, or sale of the property shall be used for cost recovery and for activities entered into under section 12 of this act, as agreed to between the state, county, or municipality and the designated organization.

The disposal of real property by the methods described in this section shall give preference to a proposed enterprise zone in the selection process.

NEW SECTION. Sec. 17. A new section is added to chapter 82.04 RCW to read as follows:

(1) A taxpayer may receive a deduction against income subject to business and occupation taxes for a contribution to a designated zone organization if the project for which the contribution is made has been specifically approved by the designating municipality or county, and by the department.

(2) A designated zone organization seeking to have a project approved for contribution must submit an application to the department describing the nature and benefit of the project and its potential contributors.

The application must address how the following criteria will be met:

(a) The project must contribute to the self-help efforts of the residents of the area involved.

(b) The project must involve the residents of the area in planning and implementing the project.

(3) The project must enhance the enterprise zone in one of the following ways:

(a) By creating permanent jobs;

(b) By physically improving the housing stock;

(d) By preventing crime.

(4) If the designated zone organization demonstrates its ability to meet the criteria in subsection (2) of this section, and will enhance the neighborhood in one of the ways listed in subsection (3) of this section, the department shall approve the organization's proposed projects and specify the amount of contributions it is eligible to receive for the project. Comments from state elected officials, and county and municipal officials in which all or part of the enterprise zone are located, or in which the project is proposed to be located, shall be solicited by the department in making such decision.

(5) Within forty-five days of the receipt of an application, the department shall give notice to the applicant as to whether the application has been approved or disapproved. If the department disapproves the application, it shall specify the reasons for this decision and allow sixty days for the applicant to amend and resubmit its application. The department shall provide assistance upon request to applicants. Resubmitted applications shall receive the department's approval or disapproval within thirty days of submission. Those resubmitted applications satisfying initial department objectives shall be approved unless reasonable circumstances warrant disapproval.

(6) On an annual basis, the designated zone organization shall furnish a statement to the department on the programmatic and financial status of an approved project and an audited financial statement of the project.

(7) For a project that is approved and for which there is a specified amount of contributions which the designated zone organization may receive for the project as provided in subsection (4) of this section, the designated zone organization shall provide to the department information necessary to determine the eligibility of a contribution to the project for a deduction.

Sec. 18. RCW 43.155.070 and 1991 sp.s. c 32 s 23 are each amended to read as follows:

(1) To qualify for loans or pledges under this chapter the board must determine that a local government meets all of the following conditions:

(a) The city or county must be imposing a tax under chapter 82.46 RCW at a rate of at least one-quarter of one percent;

(b) The local government must have developed a long-term plan for financing public works needs;

(c) The local government must be using all local revenue sources which are reasonably available for funding public works, taking into consideration local employment and economic factors; and

(d) A county, city, or town that is required or chooses to plan under RCW 36.70A.040 must have adopted a comprehensive plan in conformance with the requirements of chapter 36.70A RCW, after it is required that the comprehensive plan be adopted, and must have adopted development regulations in conformance with the requirements of chapter 36.70A RCW, after it is required that development regulations be adopted.

(2) The board shall develop a priority process for public works projects as provided in this section. The intent of the priority process is to maximize the value of public works projects accomplished with assistance under this chapter. The board shall attempt to assure a geographical balance in assigning priorities to projects. The board shall consider at least the following factors in assigning a priority to a project:

(a) Whether the local government receiving assistance has experienced severe fiscal distress resulting from natural disaster or emergency public works needs;

(b) Whether the project is critical in nature and would affect the health and safety of a great number of citizens;

(d) The number of communities served by or funding the project;

(e) Whether the project is located in an area of high unemployment, compared to the average state unemployment;

(f) Whether the project is the acquisition, expansion, improvement, or renovation by a local government of a public water system that is in violation of health and safety standards, including the cost of extending existing service to such a system;

(g) The relative benefit of the project to the community, considering the present level of economic activity in the community and the existing local capacity to increase local economic activity in communities that have low economic growth; ((~~and~~))

(h) Whether the project is located in an enterprise zone established under sections 2 through 12 and 14 through 16 of this act; and

(i) Other criteria that the board considers advisable.

(3) Existing debt or financial obligations of local governments shall not be refinanced under this chapter. Each local government applicant shall provide documentation of attempts to secure additional local or other sources of funding for each public works project for which financial assistance is sought under this chapter.

(4) Before November 1 of each year, the board shall develop and submit to the chairs of the ways and means committees of the senate and house of representatives a description of the emergency loans made under RCW 43.155.065 during the preceding fiscal year and a prioritized list of projects which are recommended for funding by the legislature, including one copy to the staff of each of the committees. The list shall include, but not be limited to, a description of each project and recommended financing, the terms and conditions of the loan or financial guarantee, the local government jurisdiction and unemployment rate, demonstration of the jurisdiction's critical need for the project and documentation of local funds being used to finance the public works project. The list shall also include measures of fiscal capacity for each jurisdiction recommended for financial assistance, compared to authorized limits and state averages, including local government sales taxes; real estate excise taxes; property taxes; and charges for or taxes on sewerage, water, garbage, and other utilities.

(5) The board shall not sign contracts or otherwise financially obligate funds from the public works assistance account before the legislature has appropriated funds for a specific list of public works projects. The legislature may remove projects from the list recommended by the board. The legislature shall not change the order of the priorities recommended for funding by the board.

(6) Subsections (4) and (5) of this section do not apply to loans made for emergency public works projects under RCW 43.155.065.

Sec. 19. RCW 43.160.060 and 1990 1st ex.s. c 17 s 73 are each amended to read as follows:

The board is authorized to make direct loans to political subdivisions of the state for the purposes of assisting the political subdivisions in financing the cost of public facilities, including development of land and improvements for public facilities, as well as the acquisition, construction, rehabilitation, alteration, expansion, or improvement of the facilities. A grant may also be authorized for purposes designated in this chapter, but only when, and to the extent that, a loan is not reasonably possible, given the limited resources of the political subdivision.

Application for funds shall be made in the form and manner as the board may prescribe. In making grants or loans the board shall conform to the following requirements:

(1) The board shall not make a grant or loan:

(a) For a project the primary purpose of which is to facilitate or promote a retail shopping development or expansion.

(b) For any project that evidence exists would result in a development or expansion that would displace existing jobs in any other community in the state.

(2) The board shall only make grants or loans:

(a) For those projects which would result in specific private developments or expansions (i) in manufacturing, production, food processing, assembly, warehousing, and industrial distribution; (ii) for processing recyclable materials or for facilities that support recycling, including processes not currently provided in the state, including but not limited to, de-inking facilities, mixed waste paper, plastics, yard waste, and problem-waste processing; (iii) for manufacturing facilities that rely significantly on recyclable materials, including but not limited to waste tires and mixed waste paper; (iv) which support the relocation of businesses from nondistressed urban areas to distressed rural areas; or (v) which substantially support the trading of goods or services outside of the state's borders.

(b) For projects which it finds will improve the opportunities for the successful maintenance, establishment, or expansion of industrial or commercial plants or will otherwise assist in the creation or retention of long-term economic opportunities.

(c) When the application includes convincing evidence that a specific private development or expansion is ready to occur and will occur only if the grant or loan is made.

(3) The board shall prioritize each proposed project according to the relative benefits provided to the community by the jobs the project would create, not just the total number of jobs it would create after the project is completed and according to the unemployment rate in the area in which the jobs would be located. As long as there is more demand for loans or grants than there are funds available for loans or grants, the board is instructed to fund projects in order of their priority. The board shall give special consideration to projects in enterprise zones established under sections 2 through 12 and 14 through 16 of this act.

(4) A responsible official of the political subdivision shall be present during board deliberations and provide information that the board requests.

Before any loan or grant application is approved, the political subdivision seeking the loan or grant must demonstrate to the community economic revitalization board that no other timely source of funding is available to it at costs reasonably similar to financing available from the community economic revitalization board.

Sec. 20. RCW 43.168.050 and 1990 1st ex.s. c 17 s 74 are each amended to read as follows:

(1) The committee may only approve an application providing a loan for a project which the committee finds:

(a) Will result in the creation of employment opportunities or the maintenance of threatened employment;

(b) Has been approved by the director as conforming to federal rules and regulations governing the spending of federal community development block grant funds;

(c) Will be of public benefit and for a public purpose, and that the benefits, including increased or maintained employment, improved standard of living, and the employment of disadvantaged workers, will primarily accrue to residents of the area;

(d) Will probably be successful;

(e) Would probably not be completed without the loan because other capital or financing at feasible terms is unavailable or the return on investment is inadequate.

(2) The committee shall, subject to federal block grant criteria, give higher priority to economic development projects that contain provisions for child care.

(3) The committee may not approve an application if it fails to provide for adequate reporting or disclosure of financial data to the committee. The committee may require an annual or other periodic audit of the project books.

(4) The committee may require that the project be managed in whole or in part by a local development organization and may prescribe a management fee to be paid to such organization by the recipient of the loan or grant.

(5) (a) Except as provided in (b) of this subsection, the committee shall not approve any application which would result in a loan or grant in excess of three hundred fifty thousand dollars.

(b) The committee may approve an application which results in a loan or grant of up to seven hundred thousand dollars if the application has been approved by the director.

(6) The committee shall fix the terms and rates pertaining to its loans.

(7) Should there be more demand for loans than funds available for lending, the committee shall provide loans for those projects which will lead to the greatest amount of employment or benefit to a community. In determining the "greatest amount of employment or benefit" the committee shall also consider the employment which would be saved by its loan and the benefit relative to the community, not just the total number of new jobs or jobs saved.

(8) To the extent permitted under federal law the committee shall require applicants to provide for the transfer of all payments of principal and interest on loans to the Washington state development loan fund created under this chapter. Under circumstances where the federal law does not permit the committee to require such transfer, the committee shall give priority to applications where the applicants on their own volition make commitments to provide for the transfer.

(9) The committee shall not approve any application to finance or help finance a shopping mall.

(10) The committee shall make at least eighty percent of the appropriated funds available to projects located in distressed areas, or enterprise zones established under sections 2 through 12 and 14 through 16 of this act, and may make up to twenty percent available to projects located in areas not designated as distressed. The committee shall not make funds available to projects located in areas not designated as distressed or as an enterprise zone if the fund's net worth is less than seven million one hundred thousand dollars.

(11) If an objection is raised to a project on the basis of unfair business competition, the committee shall evaluate the potential impact of a project on similar businesses located in the local market area. A grant may be denied by the committee if a project is not likely to result in a net increase in employment within a local market area.

NEW SECTION. Sec. 21. A new section is added to chapter 43.31 RCW to read as follows:

The department shall coordinate its programs within the department and with other agencies to assist in the success of enterprise zones established under sections 2 through 12 and 14 through 16 of this act.

NEW SECTION. Sec. 22. A new section is added to chapter 43.63A RCW to read as follows:

NEW SECTION. Sec. 23. A new section is added to chapter 50.08 RCW to read as follows:

Sec. 24. RCW 82.60.050 and 1988 c 41 s 5 are each amended to read as follows:

RCW 82.60.030 and 82.60.040 shall expire July 1, ((~~1994~~)) 2000.

Sec. 25. RCW 82.61.040 and 1988 c 41 s 2 are each amended to read as follows:

RCW 82.61.020 and 82.61.030 shall expire July 1, ((~~1994~~)) 2000.

Sec. 26. RCW 82.62.040 and 1988 c 41 s 4 are each amended to read as follows:

RCW 82.62.020 and 82.62.030 shall expire July 1, ((~~1994~~)) 2000.

Sec. 27. RCW 82.60.020 and 1988 c 42 s 16 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax deferral under this chapter.

(2) "Department" means the department of revenue.

(3) "Eligible area" means: (a) A county in which the average level of unemployment for the three years before the year in which an application is filed under this chapter exceeds the average state unemployment for those years by twenty percent; or (b) a metropolitan statistical area, as defined by the office of federal statistical policy and standards, United States department of commerce, in which the average level of unemployment for the calendar year immediately preceding the year in which an application is filed under this chapter exceeds the average state unemployment for such calendar year by twenty percent; or (c) an enterprise zone established under sections 2 through 16 of this act. ((~~Applications under this subsection (3)(b) shall be filed by April 30, 1989.~~))

(4)(a) "Eligible investment project" means that portion of an investment project which:

(i) Is directly utilized to create at least one new full-time qualified employment position for each three hundred thousand dollars of investment on which a deferral is requested; and

(ii) Either initiates a new operation, or expands or diversifies a current operation by expanding or renovating an existing building with costs in excess of twenty-five percent of the true and fair value of the plant complex prior to improvement; or

(iii) Acquires machinery and equipment to be used for either manufacturing or research and development if the machinery and equipment is housed in a new leased structure: PROVIDED, That the lessor/owner of the structure is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person.

(b) "Eligible investment project" does not include any portion of an investment project undertaken by a light and power business as defined in RCW 82.16.010(5) or investment projects which have already received deferrals under this chapter.

(5) "Investment project" means an investment in qualified buildings and qualified machinery and equipment, including labor and services rendered in the planning, installation, and construction of the project.

(6) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and shall include the production or fabrication of specially made or custom made articles. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.

(7) "Person" has the meaning given in RCW 82.04.030.

(8) "Qualified buildings" means new structures used for manufacturing and research and development activities, including plant offices and warehouses or other facilities for the storage of raw material or finished goods if such facilities are an essential or an integral part of a factory, mill, plant, or laboratory used for manufacturing or research and development. If a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.

(9) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year.

(10) "Qualified machinery and equipment" means all new industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" includes: Computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery.

(11) "Recipient" means a person receiving a tax deferral under this chapter.

(12) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.

Sec. 28. RCW 82.61.010 and 1988 c 41 s 1 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax deferral under this chapter.

(2) "Person" has the meaning given in RCW 82.04.030.

(3) "Department" means the department of revenue.

(4) "Eligible investment project" means:

(a) Construction of new buildings and the acquisition of new related machinery and equipment when the buildings, machinery, and equipment are to be used for either manufacturing or research and development activities, which construction is commenced prior to December 31, ((~~1994~~)) 2000; or

(b) Acquisition prior to December 31, ((~~1994~~)) 2000, of new machinery and equipment to be used for either manufacturing or research and development if the machinery and equipment is housed in a new leased structure: PROVIDED, That the lessor/owner of the structure is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person; or

(c) Acquisition of all new or used machinery, equipment, or other personal property for use in the production or casting of aluminum at an aluminum smelter or at facilities related to an aluminum smelter, if the plant was in operation prior to 1975 and has ceased operations or is in imminent danger of ceasing operations for economic reasons, as determined by the department, and if the person applying for a deferral (i) has consulted with any collective bargaining unit that represented employees of the plant pursuant to a collective bargaining agreement that was in effect either immediately prior to the time the plant ceased operations or during the period when the plant was in imminent danger of ceasing operations, on the proposed operation of the plant and on the terms and conditions of employment for wage and salaried employees and (ii) has obtained a written concurrence from the bargaining unit on the decision to apply for a deferral under this chapter; or

(d) Modernization projects involving construction, acquisition, or upgrading of equipment or machinery, including services and labor, which are commenced after May 19, 1987, and are intended to increase the operating efficiency of existing plants which are either aluminum smelters or aluminum rolling mills or of facilities related to such plants, if the plant was in operation prior to 1975, and if the person applying for a deferral (i) has consulted with any collective bargaining unit that represents employees of the plant on the proposed operation of the plant and the terms and conditions of employment for wage and salaried employees and (ii) has obtained a written concurrence from the bargaining unit on the decision to apply for a deferral under this chapter.

(6) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun.

(7) "Buildings" means only those new structures used for either manufacturing or research and development activities, including plant offices and warehouses or other facilities for the storage of raw materials or finished goods if such facilities are an essential or an integral part of a factory, mill, plant, or laboratory used for manufacturing or research and development purposes. If a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.

(8) "Machinery and equipment" means all industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" includes computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery. For purposes of this chapter, new machinery and equipment means either new to the taxing jurisdiction of the state or new to the certificate holder. Used machinery and equipment may be treated as new equipment and machinery if the certificate holder either brings the machinery and equipment into Washington or makes a retail purchase of the machinery and equipment in Washington or elsewhere.

(9) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year.

(10) "Recipient" means a person receiving a tax deferral under this chapter.

(11) "Certificate holder" means an applicant to whom a tax deferral certificate has been issued.

(12) "Operationally complete" means constructed or improved to the point of being functionally useable for the intended purpose.

(13) "Initiation of construction" means that date upon which on-site construction commences.

Sec. 29. RCW 82.61.070 and 1988 c 41 s 3 are each amended to read as follows:

The department and the department of trade and economic development shall jointly report to the legislature about the effects of this chapter on new manufacturing and research and development activities in this state. The report shall contain information concerning the number of deferral certificates granted, the amount of sales tax deferred, the number of jobs created and other information useful in measuring such effects. Reports shall be submitted by January 1, 1986, and by January 1 of each year through ((~~1995~~)) 2001.

Sec. 30. RCW 82.62.010 and 1988 c 42 s 17 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax credit under this chapter.

(2) "Department" means the department of revenue.

(4)(a) "Eligible business project" means manufacturing or research and development activities which are conducted by an applicant in an eligible area at a specific facility: PROVIDED, That the applicant's average full-time qualified employment positions at the specific facility will be at least fifteen percent greater in the year for which the credit is being sought than the applicant's average full-time qualified employment positions at the same facility in the immediately preceding year.

(b) "Eligible business project" does not include any portion of a business project undertaken by a light and power business as defined in RCW 82.16.010(5) or that portion of a business project creating qualified full-time employment positions outside an eligible area or those recipients of a sales tax deferral under chapter 82.61 RCW.

(5) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and shall include the production or fabrication of specially made or custom made articles. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.

(6) "Person" has the meaning given in RCW 82.04.030.

(7) "Qualified employment position" means a permanent full-time employee employed in the eligible business project during the entire tax year.

(8) "Tax year" means the calendar year in which taxes are due.

(9) "Recipient" means a person receiving tax credits under this chapter.

(10) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.

NEW SECTION. Sec. 31. Sections 2 through 12 and 14 through 16 of this act shall constitute a new chapter in Title 43 RCW.

NEW SECTION. Sec. 32. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.