AN ACT Relating to a program for reimbursement of diminished local government property tax levy capacity; adding a new chapter to Title 39 RCW; adding a new section to chapter 84.52 RCW; adding a new section to chapter 84.55 RCW; creating new sections; making an appropriation; and providing an expiration date.

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

NEW SECTION. Sec. 1. The legislature finds it essential that vital local governmental services be continuously available and recognizes that unforeseen reductions in revenues can cause a substantial lessening of the level and quality of these services. The legislature also finds that recent reductions in assessed valuations or the absence of growth in property values in certain areas of the state can result in aggregate property tax rates exceeding the otherwise allowable statutory limits. The legislature further finds that the purposes of all taxing districts would be better served if each taxing district received its full authorized levy. It is therefore the intent of this act to provide a one-year mechanism to provide this funding, where possible. It is further the intent of this act to require a legislative study to determine an appropriate long-term financing mechanism for the junior taxing districts of the state.

NEW SECTION. Sec. 2. A new section is added to chapter 84.52 RCW to read as follows:

(1) Upon being notified by the county assessor that its levy is being reduced under RCW 84.52.010 for taxes levied in 1986 for collection in 1987, a taxing district that will receive less than the taxing district is entitled to receive under RCW 84.55.010 may notify the department of revenue of its request for relief under this section. Upon receiving the notice under this section, the department shall instruct the county assessor to reduce or eliminate the levy in the taxing district or districts with the least assessed valuation that will result in no proration or the least proration for the taxing district requesting the relief. Only those taxing districts with assessed valuation equal to or less than the assessed valuation of the taxing district requesting the relief shall be adjusted in this manner. The levy by taxing districts with assessed valuation greater than the district requesting relief shall remain at its prorated amount unless this district requests relief under this section. The levy by a taxing district with assessed valuation equal to or less than the district requesting relief under this section shall be adjusted upward of the prorated amount unless the district requests that its levy rate remain at its prorated amount.

(2) If a taxing district with assessed valuation greater than the district requesting relief requests relief under this section, the department shall instruct the county assessor to recalculate the levy rates as provided in subsection (1) of this section.

(3) After the rates have been finally calculated under this section, the county assessor shall include the rates for extension on the tax rolls.

(4) On May 1, 1987, and November 1, 1987, the department shall distribute to a taxing district whose levy was reduced or eliminated under subsection (1) of this section fifty percent of the amount reduced or eliminated: PROVIDED, That in the event that state funds are not available, the requesting district shall transfer such amounts on such dates to the taxing districts whose levy was reduced or eliminated.

(5) Beginning January 1, 1988, each taxing district that received a greater amount of money as a result of this section than it otherwise would have received had levy rates been prorated under RCW 84.52.010 shall repay to the department over a period of one hundred twenty months, with no interest charges assessed, its proportionate share of the amount expended under subsection (4) of this section. The proportionate share of a taxing district shall equal the amount of money the district received in excess of the amount that it would have received had levy rates been prorated under RCW 84.52.010 divided by the total amount received by all districts in excess of the amount they would have received had levy rates been prorated under RCW 84.52.010.

(6) If the department receives more than one request for relief under this section, the department shall instruct the county assessor to adjust rates under subsection (1) of this section of the taxing districts with assessed valuations equal to or less than the district with the largest assessed valuation requesting relief unless another district would result in all requested relief under this section and less money being expended under subsection (4) of this section.

(7) The department may adopt rules to implement this section.

NEW SECTION. Sec. 3. Any agreement or contract between two taxing districts which is otherwise authorized by law may be made contingent upon a particular property tax levy rate of an identified taxing district where such rate may affect the regular property tax rate of one of the parties to the contract and therefore affects the party's resources with which to perform under the contract.

This section shall expire December 31, 1987.

NEW SECTION. Sec. 4. Any taxing district may transfer funds to another taxing district where the regular property tax levy rate of the second district may affect the regular property tax levy rate of the first district and where such transfer is part of an agreement whereby proration or reduction of property taxes is lessened or avoided.

This section shall expire December 31, 1987.

NEW SECTION. Sec. 5. A new section is added to chapter 84.55 RCW to read as follows:

The regular property tax levies for each taxing district for taxes due in 1987 through 1990 may be set at the amount which would otherwise be allowed under this chapter if the regular property tax levy for the district for taxes due in 1986 and 1987 had been set at the full amount allowed under this chapter.

This section shall expire December 31, 1990.

NEW SECTION. Sec. 6. The local governance study commission created in RCW 43.63A.252 shall undertake a study of the financing of those junior taxing districts subject to the prorating of property taxes pursuant to RCW 84.52.010. The study shall examine the extent to which those districts are dependent either directly or indirectly on property tax revenues, the impact of prorating of property taxes on the ability of those districts to maintain acceptable levels of services, and the need for a diversified resource base for such districts in anticipation of lessened or negative growth in property values. If the study reveals the existing funding mechanism to be inadequate to meet the long-term financing needs of those districts, then alternative financing proposals shall be recommended to the legislature. The commission shall report its findings by December 1, 1986.

NEW SECTION. Sec. 7. 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.

NEW SECTION. Sec. 8. The sum of five hundred thousand dollars, or so much thereof as may be necessary, is appropriated to the department of revenue from the general fund for the biennium ending June 30, 1987, for the purposes of section 2 of this act.

NEW SECTION. Sec. 9. Sections 3 and 4 of this act are supplementary and in addition to any other authority granted by law and shall not be construed to limit any other law.

NEW SECTION. Sec. 10. Sections 3 and 4 of this act shall constitute a new chapter in Title 39 RCW.