HOUSE BILL REPORT
HB 1386
As Reported by House Committee On:
Finance
Title: An act relating to modifying the property tax exemption for the value of new construction of industrial/manufacturing facilities in targeted urban areas.
Brief Description: Modifying the property tax exemption for the value of new construction of industrial/manufacturing facilities in targeted urban areas.
Sponsors: Representatives Wicks, Dolan, Lovick, Sells, Berg and Hackney.
Brief History:
Committee Activity:
Finance: 2/16/21, 2/18/21 [DP].
Brief Summary of Bill
  • Modifies county population thresholds for purposes of the targeted urban area property tax exemption (TUA Exemption) to include cities located in a county with a population between 800,000 and 900,000.
  • Expands eligible facilities for purposes of the TUA Exemption to include those facilities categorized with a transportation use.
  • Specifies certain labor specifications that must be given priority by a city when evaluating applications for a TUA Exemption.
  • Increases the average wage required for a family living wage job to $23 and requires that health care benefits be provided for purposes of the TUA Exemption.
  • Provides penalties for noncompliance with the family living wage job requirements of the TUA Exemption.
  • Extends, until December 30, 2030, the deadline to apply for a TUA Exemption.
HOUSE COMMITTEE ON FINANCE
Majority Report: Do pass.Signed by 10 members:Representatives Berg, Vice Chair; Walen, Vice Chair; Chopp, Harris-Talley, Morgan, Orwall, Ramel, Springer, Thai and Wylie.
Minority Report: Do not pass.Signed by 2 members:Representatives Dufault, Assistant Ranking Minority Member; Stokesbary.
Minority Report: Without recommendation.Signed by 3 members:Representatives Orcutt, Ranking Minority Member; Chase and Vick.
Staff: Nick Tucker (786-7383).
Background:

Property Tax.
All property is subject to a tax each year based on the highest and best use, unless a specific exemption is provided by law.  The county assessor determines assessed value for each property and calculates property taxes.  The property tax bill for an individual property is determined by multiplying the assessed value of the property by the tax rate for each taxing district in which the property is located.  The aggregate of all regular tax levies upon real and personal property by the state and all taxing districts may not exceed 1 percent of the true and fair value of the property.  In addition, the aggregate regular levies of junior taxing districts and senior taxing districts, other than the state, may not exceed $5.90 per $1,000 of assessed valuation.


Targeted Urban Area Property Tax Exemption.
Certain cities are authorized to grant a 10-year local property tax exemption for new industrial or manufacturing facilities in designated areas.  To be eligible, a city must be:  located in a county with a population between 700,000 and 800,000; have a population of at least 18,000; and be located north or east of the largest city in the county.


Industrial or manufacturing facilities must be at least 10,000 square feet with an improvement value of at least $800,000 and be categorized as a manufacturing use by the United States Department of Labor.  Additionally, new construction of industrial or manufacturing facilities must:

  • be within a targeted area as designated by the city;
  • be on land that has no existing building improvements and that is zoned for an industrial or manufacturing use as of December 31, 2014;
  • meet all construction and development regulations of the city; and
  • be completed within 3 years from the date of approval of the application.

 

Within one year of building occupancy, the facility must create at least 25 family living wage jobs with an average wage of at least $18 per hour.


A property owner seeking the exemption must apply to the city, pay any applicable fees, and enter into a contract with the city agreeing to terms and conditions of the implementation of the development.  No application may be submitted on or after December 31, 2022.


The value of the property tax exemption is provided on the value of eligible improvements and applies only to the city portion of the property tax.  A county may, by resolution, allow any property receiving an exemption from city property taxes to also receive an exemption from county property taxes.


If exempted improvements are converted to another use or do not continue to satisfy all conditions of the exemption, the exemption must be canceled and an additional tax must be imposed on the property equal to the amount that was exempted but for which program requirements were not met.  The amount due is subject to interest, calculated from the date when the tax would have otherwise been due, and a penalty equal to 20 percent of the additional tax imposed.

Summary of Bill:

Eligible cities must be located in a county with a population between 800,000 and 900,000.


A family living wage job must have an average wage of $23 per hour and offer health care benefits.


Facilities categorized as Division E:  Transportation (major groups 40-42, 45, or 47-48) by the United States Department of Labor are eligible for the exemption.  Cities may limit eligible facilities to exclude Division E:  Transportation categorizations.


In evaluating applications, a city must give priority to those applicants that:

  • compensate workers at prevailing wage;
  • procure from, and contract with, women-, minority-, or veteran-owned businesses;
  • procure from, and contract with, entities with a history of compliance with wage and hour regulations;
  • include apprenticeship utilization from state-registered apprenticeship programs;
  • provide for preferred entry for workers living in the vicinity of the project; and
  • maintain labor standards for workers employed at the facility.

 

If a project fails to maintain 25 family living wage jobs, the exemption must be canceled and an additional tax must be imposed on the property equal to the amount that was exempted but for which program requirements were not met, beginning from when the facility last maintained a minimum of at least 25 family living wage jobs.


No application for exemption may be submitted on or after December 31, 2030.

Appropriation: None.
Fiscal Note: Available.
Effective Date: 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 is a modification and extension to an existing exemption that was established in response to the Oso mudslide to help the cities of Marysville, Arlington, and Lake Stevens.  These cities have worked diligently to be able to offer this exemption to potential businesses.  There are few jobs in this region and citizens often have to commute to other areas for work, which creates traffic and has a negative environmental impact.  It is important to support local jobs.  There is a lot of opportunity for growth in employment in this region, but this type of program is needed to be competitive with other states to attract new businesses.  This only applies to local property tax, so there is no state revenue impact. 

 

(Opposed) None.

Persons Testifying: Representative Wicks, prime sponsor; Jon Nehring, City of Marysville; Barb Tolbert, City of Arlington; and Stephanie Wright, Snohomish County Council.
Persons Signed In To Testify But Not Testifying: None.