AN ACT Relating to encouraging affordable housing development and preservation by providing cities limited sales tax remittance for qualifying investments, providing cities and counties authority to use real estate excise taxes to support affordable housing, and providing cities and counties with councilmanic authority to impose the affordable housing sales tax; amending RCW 82.46.010, 82.46.035, and 82.14.530; adding a new section to chapter 82.46 RCW; and adding a new chapter to Title 82 RCW.

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

(1) "Affordable housing" means residential housing units for rental occupancy that are rented or owned by a person or household whose monthly housing costs, including utilities other than telephone, do not exceed thirty-percent of the person's or household's monthly income.

(2) "City" means any first-class city as defined in RCW 35.01.010 or any second-class city as defined in RCW 35.01.020.

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

(4) "Local infrastructure" has the same meaning as provided for "public improvements" under RCW 39.104.020(18).

(5) "Local sales and use tax" means the local revenue derived from the imposition of taxes authorized in RCW 82.14.030.

(6) "Low-income housing" means residential housing units that are available to persons with annual incomes at or below sixty percent of the county's median income as determined by the office of financial management.

(2) A city that builds approved local infrastructure to facilitate the development of affordable housing may receive a one-time remittance that is the equivalent of a 4.37 percent sales or use tax on the construction of such local infrastructure. The remittance received by the city under this section must be credited against the sales tax due to the state under chapter 82.08 RCW on the same sales. The remittance under this section is subject to application and approval under section 4 of this act.

(1) The city must create an affordable housing and local infrastructure account to be used solely for the city's acquisition or construction of affordable housing or local infrastructure; and

(2) The city must deposit into the affordable housing and local infrastructure account created in subsection (1) of this section 0.85 percent of any local sales and use taxes collected by the city on sales or uses related to the acquisition or construction of affordable housing or local infrastructure by taxpayers within the city's taxing jurisdiction.

(a) In the case of the affordable housing program:

(i) Information establishing the need for affordable housing in that city;

(ii) The anticipated cost of acquiring or building the affordable housing;

(iii) The estimated annual operating costs for the affordable housing for twenty-five years;

(iv) The amount of the remittance it is requesting; and

(v) The date of expected remittance; and

(b) In the case of the local infrastructure program:

(i) Information establishing that the local infrastructure is needed for an approved private project that will provide affordable residential development;

(ii) The anticipated cost of the project;

(iii) The amount of remittance it is requesting; and

(iv) The date of the expected remittance.

(2) Remittance awards must be determined based on:

(a) For affordable housing:

(i) The immediate need for affordable housing in the requesting city;

(ii) The number of affordable housing units that will be created;

(iii) The city's rental vacancy rate for residential units; and

(iv) The speed with which the project can begin; and

(b) For local infrastructure projects:

(i) The speed with which the project can begin;

(ii) The type of residential development being attracted by the infrastructure investment, prioritized as follows:

(A) Low-income rental residential units;

(B) Affordable rental residential units;

(C) Low-income homeownership projects; and

(D) Affordable homeownership projects; and

(iii) The extent the project will leverage the public funds with private investment.

(3)(a) The department must notify the city of approval or denial within sixty days of receipt of application. Determination by the department is final.

(b) Upon approval by the department, the city may apply to the department of revenue for a remittance under this chapter.

(4) The department must accept applications and begin approving project awards as of January 1, 2018.

(5) No applications may be submitted under this chapter after January 1, 2023.

NEW SECTION.  Sec. 5.  A new section is added to chapter 82.46 RCW to read as follows:

(1) The legislative authority of a city or county, as permitted under subsection (2) of this section, may impose an additional excise tax on the sale of real property in the city at the rate of up to one-quarter of one percent of the selling price. The proceeds of the tax must be used exclusively for the development of affordable housing, including the acquisition, building, rehabilitation, and maintenance of the housing, except up to three percent of the proceeds may be used for the administration of affordable housing programs by the affordable housing entity receiving the proceeds of the tax. Any tax imposed by a city under this subsection must be credited against the same tax imposed by a county.

(2) Any city or county with a population of less than one million residents may impose the excise tax upon the enactment of this chapter. Any county with a population greater than one million residents may impose the excise tax after October 1, 2020.

(3)(a) Within three months after the tax has been authorized, the affordable housing entity designated by the city or county must establish a mechanism for receiving grant and loan applications, and criteria by which the applications will be approved and funded.

(b) The city or county enacting the tax imposed under this section must hold at least one public hearing in respect to the mechanism and criteria to be established under (a) of this subsection.

(4) Revenues generated from the tax imposed under this section must be placed in an affordable housing account administered by the affordable housing entity. Disbursements from the account must be in accordance with criteria adopted under subsection (3) of this section.

(5) The tax authorized under this section is imposed in the same manner and on the same occurrences, and is subject to the same conditions, as the tax under chapter 82.45 RCW for taxable events occurring within the city or county imposing the tax. The imposition of the tax is effective no sooner than sixty days after the ordinance establishing the tax is authorized by the city or county legislative body and the effective date must be on the first day of a calendar quarter.

(6) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.

(a) "Affordable housing" means housing units in which rent levels may not exceed thirty percent of the income limit for the low-income housing unit.

(i) Rental housing units must be affordable to and occupied by households with an income of sixty percent or less of the county median family income, adjusted for family size.

(ii) Owner occupancy housing units must be affordable to and occupied by households with an income of eighty percent or less of the county median family income, adjusted for family size.

(b) "Affordable housing entity" means local governments, local housing authorities, nonprofit community or neighborhood-based organizations, federally recognized Indian tribes in the state of Washington, and regional or statewide housing assistance nonprofit organizations or cooperatives.

(7) Affordable housing units funded by the tax authorized under this section must constitute affordable housing for a minimum of fifty years.

Sec. 6.  RCW 82.46.010 and 2015 2nd sp.s. c 10 s 1 are each amended to read as follows:

(1) The legislative authority of any county or city must identify in the adopted budget the capital projects funded in whole or in part from the proceeds of the tax authorized in this section, and must indicate that such tax is intended to be in addition to other funds that may be reasonably available for such capital projects.

(2)(a) The legislative authority of any county or any city may impose an excise tax on each sale of real property in the unincorporated areas of the county for the county tax and in the corporate limits of the city for the city tax at a rate not exceeding one-quarter of one percent of the selling price. The revenues from this tax must be used by any city or county with a population of five thousand or less and any city or county that does not plan under RCW 36.70A.040 for:

(i) Any capital purpose identified in a capital improvements plan and local capital improvements, including those listed in RCW 35.43.040; or

(ii) The development of affordable housing including acquisition, building, rehabilitation, and maintenance and operation of housing for very low, low, and moderate-income persons and those with special needs.

(b) After April 30, 1992, revenues generated from the tax imposed under this subsection (2) in counties over five thousand population and cities over five thousand population that are required or choose to plan under RCW 36.70A.040 must be used solely for financing capital projects specified in a capital facilities plan element of a comprehensive plan and housing relocation assistance under RCW 59.18.440 and 59.18.450. However, revenues (i) pledged by such counties and cities to debt retirement prior to April 30, 1992, may continue to be used for that purpose until the original debt for which the revenues were pledged is retired, or (ii) committed prior to April 30, 1992, by such counties or cities to a project may continue to be used for that purpose until the project is completed.

(3) In lieu of imposing the tax authorized in RCW 82.14.030(2), the legislative authority of any county or any city may impose an additional excise tax on each sale of real property in the unincorporated areas of the county for the county tax and in the corporate limits of the city for the city tax at a rate not exceeding one-half of one percent of the selling price.

(4) Taxes imposed under this section must be collected from persons who are taxable by the state under chapter 82.45 RCW upon the occurrence of any taxable event within the unincorporated areas of the county or within the corporate limits of the city, as the case may be.

(5) Taxes imposed under this section must comply with all applicable rules, regulations, laws, and court decisions regarding real estate excise taxes as imposed by the state under chapter 82.45 RCW.

(6) The definitions in this subsection (6) apply throughout this section unless the context clearly requires otherwise.

(a) "City" means any city or town.

(b) "Capital project" means those public works projects of a local government for planning, acquisition, construction, reconstruction, repair, replacement, rehabilitation, or improvement of streets; roads; highways; sidewalks; street and road lighting systems; traffic signals; bridges; domestic water systems; storm and sanitary sewer systems; parks; recreational facilities; law enforcement facilities; fire protection facilities; trails; libraries; administrative facilities; judicial facilities; river flood control projects; waterway flood control projects by those jurisdictions that, prior to June 11, 1992, have expended funds derived from the tax authorized by this section for such purposes; until December 31, 1995, housing projects for those jurisdictions that, prior to June 11, 1992, have expended or committed to expend funds derived from the tax authorized by this section or the tax authorized by RCW 82.46.035 for such purposes; and technology infrastructure that is integral to the capital project.

(7) From July 22, 2011, until December 31, 2016, a city or county may use the greater of one hundred thousand dollars or thirty-five percent of available funds under this section, but not to exceed one million dollars per year, for the operations and maintenance of existing capital projects as defined in subsection (6) of this section.

Sec. 7.  RCW 82.46.035 and 2011 c 354 s 3 are each amended to read as follows:

(1) The legislative authority of any county or city must identify in the adopted budget the capital projects funded in whole or in part from the proceeds of the tax authorized in this section, and must indicate that such tax is intended to be in addition to other funds that may be reasonably available for such capital projects.

(2) The legislative authority of any county or any city that plans under RCW 36.70A.040(1) may impose an additional excise tax on each sale of real property in the unincorporated areas of the county for the county tax and in the corporate limits of the city for the city tax at a rate not exceeding one-quarter of one percent of the selling price. Any county choosing to plan under RCW 36.70A.040(2) and any city within such a county may only adopt an ordinance imposing the excise tax authorized by this section if the ordinance is first authorized by a proposition approved by a majority of the voters of the taxing district voting on the proposition at a general election held within the district or at a special election within the taxing district called by the district for the purpose of submitting such proposition to the voters.

(3) Revenues generated from the tax imposed under subsection (2) of this section must be used by such counties and cities ((solely)) for financing capital projects specified in a capital facilities plan element of a comprehensive plan or for the development of affordable housing including acquisition, building, rehabilitation, and maintenance and operation of housing for very low, low, and moderate-income persons and those with special needs. However, revenues (a) pledged by such counties and cities to debt retirement prior to March 1, 1992, may continue to be used for that purpose until the original debt for which the revenues were pledged is retired, or (b) committed prior to March 1, 1992, by such counties or cities to a project may continue to be used for that purpose until the project is completed.

(4) Revenues generated by the tax imposed by this section must be deposited in a separate account.

(5) As used in this section, "city" means any city or town and "capital project" means those public works projects of a local government for planning, acquisition, construction, reconstruction, repair, replacement, rehabilitation, or improvement of streets, roads, highways, sidewalks, street and road lighting systems, traffic signals, bridges, domestic water systems, storm and sanitary sewer systems, and planning, construction, reconstruction, repair, rehabilitation, or improvement of parks.

(6) When the governor files a notice of noncompliance under RCW 36.70A.340 with the secretary of state and the appropriate county or city, the county or city's authority to impose the additional excise tax under this section is temporarily rescinded until the governor files a subsequent notice rescinding the notice of noncompliance.

(7) From June 30, 2012, until December 31, 2016, a city or county may use the greater of one hundred thousand dollars or thirty-five percent of available funds under this section, but not to exceed one million dollars per year, for operations and maintenance of existing capital projects as defined in subsection (5) of this section, and counties may use available funds under this section for the payment of existing debt service incurred for capital projects as defined in RCW 82.46.010. If a county uses available funds for payment of existing debt service under RCW 82.46.010, the total amount used for payment of debt service and any amounts used for operations and maintenance is subject to the limits in this subsection.

Sec. 8.  RCW 82.14.530 and 2015 3rd sp.s. c 24 s 701 are each amended to read as follows:

(1)(a) A county legislative authority may ((submit an authorizing proposition to the county voters at a special or general election and, if the proposition is approved by a majority of persons voting,)) impose a sales and use tax in accordance with the terms of this chapter. ((The title of each ballot measure must clearly state the purposes for which the proposed sales and use tax will be used.)) The rate of tax under this section may not exceed one-tenth of one percent of the selling price in the case of a sales tax, or value of the article used, in the case of a use tax.

(b)(i) If a county with a population of one million five hundred thousand or less has not imposed the full tax rate authorized under (a) of this subsection within two years of October 9, 2015, any city legislative authority located in that county may ((submit an authorizing proposition to the city voters at a special or general election and, if the proposition is approved by a majority of persons voting,)) impose the whole or remainder of the sales and use tax rate in accordance with the terms of this chapter. ((The title of each ballot measure must clearly state the purposes for which the proposed sales and use tax will be used.)) The rate of tax under this section may not exceed one-tenth of one percent of the selling price in the case of a sales tax, or value of the article used, in the case of a use tax.

(ii) If a county with a population of greater than one million five hundred thousand has not imposed the full tax authorized under (a) of this subsection within three years of October 9, 2015, any city legislative authority located in that county may ((submit an authorizing proposition to the city voters at a special or general election and, if the proposition is approved by a majority of persons voting,)) impose the whole or remainder of the sales and use tax rate in accordance with the terms of this chapter. ((The title of each ballot measure must clearly state the purposes for which the proposed sales and use tax will be used.)) The rate of tax under this section may not exceed one-tenth of one percent of the selling price in the case of a sales tax, or value of the article used, in the case of a use tax.

(c) If a county imposes a tax authorized under (a) of this subsection after a city located in that county has imposed the tax authorized under (b) of this subsection, the county must provide a credit against its tax for the full amount of tax imposed by a city.

(d) The taxes authorized in this subsection are in addition to any other taxes authorized by law and must be collected from persons who are taxable by the state under chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the county for a county's tax and within a city for a city's tax.

(2)(a) Notwithstanding subsection (4) of this section, a minimum of sixty percent of the moneys collected under this section must be used for the following purposes:

(i) Constructing affordable housing, which may include new units of affordable housing within an existing structure, and facilities providing housing-related services; or

(ii) Constructing mental and behavioral health-related facilities; or

(iii) Funding the operations and maintenance costs of new units of affordable housing and facilities where housing-related programs are provided, or newly constructed evaluation and treatment centers.

(b) The affordable housing and facilities providing housing-related programs in (a)(i) of this subsection may only be provided to persons within any of the following population groups whose income is at or below sixty percent of the median income of the county imposing the tax:

(i) Persons with mental illness;

(ii) Veterans;

(iii) Senior citizens;

(iv) Homeless, or at-risk of being homeless, families with children;

(v) Unaccompanied homeless youth or young adults;

(vi) Persons with disabilities; or

(vii) Domestic violence survivors.

(c) The remainder of the moneys collected under this section must be used for the operation, delivery, or evaluation of mental and behavioral health treatment programs and services or housing-related services.

(3) A county that imposes the tax under this section must consult with a city before the county may construct any of the facilities authorized under subsection (2)(a) of this section within the city limits.

(4) A county that has not imposed the tax authorized under RCW 82.14.460 prior to October 9, 2015, but imposes the tax authorized under this section after a city in that county has imposed the tax authorized under RCW 82.14.460 prior to October 9, 2015, must enter into an interlocal agreement with that city to determine how the services and provisions described in subsection (2) of this section will be allocated and funded in the city.

(5) To carry out the purposes of subsection (2)(a) and (b) of this section, the legislative authority of the county or city imposing the tax has the authority to issue general obligation or revenue bonds within the limitations now or hereafter prescribed by the laws of this state, and may use, and is authorized to pledge, up to fifty percent of the moneys collected under this section for repayment of such bonds, in order to finance the provision or construction of affordable housing, facilities where housing-related programs are provided, or evaluation and treatment centers described in subsection (2)(a)(iii) of this section.

(6)(a) Moneys collected under this section may be used to offset reductions in state or federal funds for the purposes described in subsection (2) of this section.

(b) No more than ten percent of the moneys collected under this section may be used to supplant existing local funds.

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