HOUSE BILL REPORT

HB 298

BYRepresentatives Haugen, Brough, P. King, Holm and Unsoeld

Permitting cities and towns to be withdrawn from library districts and fire protection districts.

House Committe on Local Government

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (13)

     Signed by Representatives Haugen, Chair; Cooper, Vice Chair; Beck, Bumgarner, Ferguson, Hine, Madsen, Nealey, Nelson, Nutley, Rayburn, L. Smith and Zellinsky.

House Staff:Steve Lundin (786-7127)

Rereferred House Committee on Ways & Means/Revenue

Majority Report:     The substitute bill by Committee on Local Government be substituted therefor and the substitute bill do pass.  (10)

     Signed by Representatives Appelwick, Chair; Basich, Grimm, Holland, Madsen, Rust, Schoon, Taylor, Valle and Winsley.

House Staff:    Rick Wickman (786-7150)

AS REPORTED BY COMMITTEE ON WAYS & MEANS/REVENUE MARCH 7, 1987

BACKGROUND:

Traditionally library districts and fire protection districts could not be located within all or part of a city or town.  Whenever an area incorporated as a city or town, or annexed into a city or town, the area was withdrawn from the library district or fire district.

More taxing capacity exists outside a city or town for junior taxing districts, than inside a city or town.  Cities have been authorized to impose property taxes of up to $3.375 per $1,000 of assessed valuation (their supposed "normal" tax rate).  However, those cities that had a fire fighters's pension system before the Law Enforcement Officers and Fire Fighters' (LEOFF) retirement system was created, can impose an additional property tax of $.225 per $1,000 to finance this retirement system, and thus impose property taxes of up to $3.60 per $1,000 of assessed valuation (or their "normal" tax rate plus $.225 per $1,000 of assessed valuation).

When laws were enacted allowing library districts to annex cities and towns, and for fire districts to annex cities and towns, the maximum levy rate of the city or town was reduced to an amount equal to $3.60 minus the tax rate of the library district or fire district.  The library district provided library service in the city or town, or the fire district provided fire fighting in the city or town, and the city or town was relieved from the burden of providing these services or contracting for these services.  This resulted in an effective increase in tax rates in the city or town of $.225 per $1,000 of assessed valuation and has correspondingly reduced what was available for the junior taxing districts to take.

Statutes further restrict property taxes by limiting the regular property taxes payable to any taxing district in any year to an amount equal to not more than 106 percent of the highest of the most recent three years of annual property taxes payable to that taxing district, not including taxes on increases in assessed valuation due to new construction.  The 106 percent limitation may be waived in any year by simple majority vote of the taxing district voters.

A metropolitan park district must include a city within its boundaries.  Hospital districts may include cities or towns within their boundaries.

SUMMARY:

SUBSTITUTE BILL:  Library districts, hospital districts, fire districts, and metro park districts are authorized to de-annex areas, or withdraw the areas from their boundaries, if it appears that the retention of the areas within their boundaries would cause a reduction of their tax rates under operation of the $9.15 limitation.  A de-annexation would occur upon:  (a) request by the junior taxing district; and (b) approval by the city or town if the area were inside the city or town, or by the county if the area were outside of a city or town.

A re-annexation into the area could occur upon:  (a) request by the junior taxing district; and (b) approval by the city or town if the area were inside the city or town, or by the county if the area were outside a city or town.  Potential referendum action by voters in the area to be re-annexed could be taken.

If territory were so removed from a junior taxing district's boundaries, then its tax receipts under the 106 percent limitation are calculated as if the territory never had been in the district's boundaries.  If a city or town were removed from a library or fire district's boundaries, the city's or town's tax receipts under the 106 percent limitation are calculated as if the library or fire district had not been within its boundaries.

If an area were withdrawn from one of these junior taxing districts that is coterminous with the boundaries of another taxing district, the boundaries for taxation purposes are established on October 1 of that year instead of March 1 of that year.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The bill is entirely new.  The original allowed unilateral de-annexation of a city or town by a library district or fire district.

CHANGES PROPOSED BY COMMITTEE ON WAYS & MEANS/REVENUE:  None.

Fiscal Note:    Attached.

House Committee ‑ Testified For:     (Local Government)  Stan Finkelstein, Association of Washington Cities; Mark Allen, Washington Library Association; Marilyn Showalter, Public Hospital District; and Mark Lynch, North Central Regional Library.

(Ways & Means/Revenue)  None Presented.

House Committee - Testified Against: (Local Government)  None Presented.

(Ways & Means/Revenue)  None Presented.

House Committee - Testimony For:     (Local Government)  This will allow needed boundary to avoid proration under the $9.15 limitation.  The city or county must concur.

(Ways & Means/Revenue)  None Presented.

House Committee - Testimony Against: (Local Government)  Voters are not allowed to participate in such a de-annexation.  A public hearing is not mandated.

(Ways & Means/Revenue)  None Presented.