Brief Description: Revising sales and use tax equalization payments.

Sponsors: Representatives Murray, Cooper, Wallace, Clibborn, Simpson, Hudgins and Hankins.

Hearing Date: 3/26/03

Staff: Gene Baxstrom (786-7303).

Background:

Transit agencies are authorized to impose, with voter approval, a sales and use tax of up to 0.9 percent, a business and occupation tax with a rate set by the agency, or a household/utility tax of up to $1 per month per housing unit. Of the 25 transit agencies in the state, 23 collect sales and use tax from 0.1 percent to 0.9 percent. For the other agencies, Pullman Transit collects a utility tax of 2.0 percent and Garfield County Public Transportation is supported by county funds. Certain agencies have sales tax collections which are well under statewide average sales tax collections.

Since 1996 sales and use tax equalization payments were authorized to transit agencies whose average per capita transit sales and use tax collections in the preceding calendar year were less than 80 percent of the statewide per capita average sales and use tax collections for that period. These transit equalization payments began in calendar year 1996 and were also applicable to transit agencies using a tax source other than the sales tax. Equalization payments could not exceed 50 percent of a transit agency's sales and use tax or other tax collections for the previous year nor could they exceed the equivalent of 0.3 percent sales tax.

Transit sales and use tax equalization was paid from motor vehicle excise tax receipts that would otherwise have been available for appropriation from the transportation fund. When legislation was enacted in the 2000 session (enacting I-695) and repealing the Motor Vehicle Excise Tax, transit equalization payments were eliminated.

Summary of Bill:

Beginning January 1, 2004 until December 31, 2013, transit agencies whose tax collections are below 80 percent of the statewide weighted average per capita levels of sales and use tax are eligible for equalization payments from the multimodal transportation account. The equalization payments are based on the local transit tax rate or in the case of agencies not utilizing the sales tax, the tax rate equivalent to the sales and use tax rate that would have generated the same amount of revenue in the previous year for that transit agency.

Equalization payments distributed by the Department of Revenue are limited to $6 million per year. If the eligibility of agencies exceeds available funds, revenues are to be first used to equalize up to 80 percent of a local tax rate of 0.3 percent or 80 percent of the amount necessary to equalize the local tax rate imposed by the municipality, whichever is less; and second, to equalize agencies up to 80 percent of the local tax rate imposed above 0.3 percent. In no case may equalization payments exceed the amount of revenues raised by 0.3 percent sales tax or 50 percent of local taxes collected. The tax credits and grants expire June 30, 2013. If additional funding is not provided for the Multimodal Transportation Account by January 1, 2004, the act is null and void.

Appropriation: None.

Fiscal Note: Not Requested.

Effective Date: The bill takes effect on January 1, 2004.