HOUSE BILL REPORT

HB 1306

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by House Committee On:

Technology & Economic Development

Finance

Title: An act relating to extending the expiration dates of the local infrastructure financing tool program.

Brief Description: Extending the expiration dates of the local infrastructure financing tool program.

Sponsors: Representatives Wylie, Moeller, Harris, Pike, Johnson, Chandler, Sells, Pollet, Upthegrove and Moscoso.

Brief History:

Committee Activity:

Technology & Economic Development: 2/5/13, 2/20/13 [DPS];

Finance: 2/26/13, 2/28/13 [DP2S(w/o sub TED)].

Brief Summary of Second Substitute Bill

  • Extends the expiration date of the Local Infrastructure Financing Tool program from June 30, 2039, to June 30, 2044.

  • Requires local jurisdictions commence construction by June 30, 2017, to impose the state shared local sales and use tax.

  • Removes the requirement that a sponsoring local government must issue indebtedness to receive a state sales and use tax credit.

HOUSE COMMITTEE ON TECHNOLOGY & ECONOMIC DEVELOPMENT

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 15 members: Representatives Morris, Chair; Habib, Vice Chair; Smith, Ranking Minority Member; Crouse, Assistant Ranking Minority Member; Hudgins, Kochmar, Magendanz, Maxwell, Morrell, Stonier, Tarleton, Vick, Walsh, Wylie and Zeiger.

Minority Report: Do not pass. Signed by 1 member: Representative Dahlquist.

Staff: Jennifer Thornton (786-7147).

Background:

In 2006 the Local Infrastructure Financing Tool (LIFT) program was created and made available to certain local governments for financing local public improvement projects intended to encourage economic development or redevelopment. As part of the LIFT program, a sponsoring local government (a city, town, county, or federally recognized Indian tribe) creates a "revenue development area" from which annual increases in revenues from local sales and use taxes and local property taxes are measured. Such increases in revenues and any additional funds from other local public sources are then used to pay for public improvements in the revenue development area and are also used to match a state contribution.

State funding for the LIFT program is provided through a credit against the state sales and use tax.  The sponsoring local government is allowed to retain a certain amount of state sales and use tax revenue that would otherwise be deposited in the State General Fund. The maximum state contribution that a sponsoring local government can receive each year is limited to the lesser of:

The local funds and state contribution are used for the payment of bonds issued for financing local public improvements within the revenue development area. The public improvements may be financed on a pay-as-you-go basis but only for the first five years of the state contribution. Sponsoring local governments must issue bonds by the end of the fifth fiscal year that the state sales tax revenue is retained. State sales taxes cannot be retained by a sponsoring local government for the LIFT program for more than 25 years.

The maximum statewide contribution for all of the LIFT projects is capped at $7.5 million per year. Nine projects have been awarded state contributions under the LIFT program. The projects are located in Bellingham, Bothell, Everett, Federal Way, Mount Vernon, Puyallup, Vancouver, Yakima, and Spokane County.

The application process for the LIFT program is closed. The expiration date for the LIFT program is June 30, 2039.

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Summary of Substitute Bill:

The expiration date of the Local Infrastructure Financing Tool Program is extended from June 30, 2039, to June 30, 2049.

A sponsoring local government may receive a sales and use tax credit without beginning public improvement construction for seven, rather than five years.

The requirement that a sponsoring local government issue bonds within five years of receiving a sales and use tax credit is removed.

Substitute Bill Compared to Original Bill:

The requirement that local governments issue indebtedness to finance the costs of public improvements is removed.

Technical errors in expiration date provisions are made so that the expiration date of the entire Local Infrastructure Financing Tool Program is extended through June 30, 2049.

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Appropriation: None.

Fiscal Note: Preliminary fiscal note available. New fiscal note requested on February 20, 2013.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) This bill corrects an unintended consequence of the original Local Infrastructure Financing Tool (LIFT) legislation by extending important deadlines. In 2007 the city of Vancouver entered into an agreement with a developer that includes a library, office space, and retail space, all served by a parking garage funded by LIFT. The library opened last year.  An average of 1,500 people a day come into the building, but there is limited parking available.  Vancouver would need to start next year to maximize the 25 years and complete the project by the 2039 date. Extra time is needed to complete a sustainable, economically viable mixed-use project, and realize the full potential for the site. A mill that shut down in Yakima eliminated 250 jobs in the community. Redeveloping this site will generate approximately 5,000 jobs. Given the local, state, and national economic challenges, it is difficult to accomplish major projects. Providing an increased time to bond does not raise any taxes.  Yakima needs to be shovel ready to issue the bonds, and will not be ready in 2015. The investment of $25 million in Yakima over 25 years is expected to generate $337 million in private sector investment and $426 million in tax revenue over the next 30 years.

(Opposed) None.

Persons Testifying: Alisa Pyszka; Patty Reyes, Fort Vancouver Regional Library; and Joan Davenport, City of Yakima.

Persons Signed In To Testify But Not Testifying: None.

HOUSE COMMITTEE ON FINANCE

Majority Report: The second substitute bill be substituted therefor and the second substitute bill do pass and do not pass the substitute bill by Committee on Technology & Economic Development. Signed by 12 members: Representatives Carlyle, Chair; Tharinger, Vice Chair; Nealey, Ranking Minority Member; Orcutt, Assistant Ranking Minority Member; Condotta, Fitzgibbon, Hansen, Lytton, Pollet, Springer, Vick and Wilcox.

Minority Report: Without recommendation. Signed by 1 member: Representative Reykdal.

Staff: Dominique Meyers (786-7150).

Summary of Recommendation of Committee On Finance Compared to Recommendation of Committee On Technology & Economic Development:

Local jurisdiction must commence construction of a public improvement project by June 30, 2017, to impose the state shared local sales and use tax. The expiration date for the entire program is changed from 2049 to 2044. (Under current law, the program expires 2039.)

Appropriation: None.

Fiscal Note: Available.

Effective Date of Second Substitute Bill: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) Vancouver is concerned that the sunset date would require Vancouver to prematurely levy the state shared tax to being implementation of a public private project before the city is ready. Vancouver wants a robust project and the sunset is arbitrary and requires us to trigger the project before the city is ready. In order to maximize the full potential of the Local Infrastructure Financing Tool (LIFT) program Vancouver would have to implement the project next year and the city is not financially prepared to start next year. The extension of the expiration to 2049 will allow the city to maximize the full LIFT 25-year program.

Mount Vernon's LIFT funding of up to $500,000 a year is critical. Using Mount Vernon's LIFT funds is a timing issue. Providing Mount Vernon with more time to start the clock will have a definite pay off for the state. To develop Yakima's LIFT project will create 200 short-term construction jobs and long term over 4,000 jobs. It has been tough for Yakima to get started on this project.

(In support with amendment) The bond council just has one technical amendment they would like to suggest; the language does not change the intent.

(Opposed) None.

Persons Testifying: (In support) Representative Wylie, prime sponsor; Mark Brown, and Alisa Pyszka, City of Vancouver; Patty Reyes, Fort Vancouver Regional Library; Jill Boudreau, City of Mount Vernon; and Jim Justin, City of Yakima.

(In support with amendment) Jim Hedrick, Greenstone Homes.

Persons Signed In To Testify But Not Testifying: None.