AN ACT Relating to funding for business and economic development programs; amending RCW 82.62.010 and 82.62.030; adding a new chapter to Title 43 RCW; and creating new sections.

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

NEW SECTION. Sec. 1. (1) The legislature finds:

(a) The continued economic vitality of downtown and neighborhood commercial districts in our state's cities are essential to community preservation, social cohesion, and economic growth;

(b) In recent years there has been a deterioration of downtown and neighborhood commercial districts in rural and urban communities due to a shifting population base, changes in the marketplace, and greater competition from suburban shopping malls and discount centers;

(c) This decline has eroded the ability of businesses and property owners to renovate and enhance their commercial and residential properties; and

(d) Business owners in these districts need to maintain their local economies in order to provide goods and services to adjacent residents, to provide employment opportunities, and to avoid disinvestment and economic dislocations, and have developed downtown and neighborhood commercial district revitalization programs to address these problems.

(2) It is the intent of the legislature to establish a program to:

(a) Work in partnership with these organizations;

(b) Provide technical assistance and training to local governments, business organizations, downtown and neighborhood commercial district organizations, and business and property owners to accomplish community and economic revitalization and development of business districts; and

NEW SECTION. Sec. 2. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Area" means a geographic area within a local government that is described by a close perimeter boundary.

(2) "Department" means the department of community, trade, and economic development.

(3) "Director" means the director of community, trade, and economic development.

(4) "Local government" means a city, code city, town, or county with a population of at least three hundred thousand.

(5) "Qualified levels of participation" means a local downtown and neighborhood commercial district revitalization effort that has been certified by the department, as being at the participant-level, associate-level, or partner-level.

NEW SECTION. Sec. 3. The Washington main street program is created within the department. In order to implement the Washington main street program, the department shall:

(1) Provide technical assistance to businesses, property owners, organizations, and local governments undertaking a comprehensive downtown and neighborhood commercial district revitalization and management strategy within a specified area. Technical assistance includes, but is not limited to: Initial site evaluations and assessments; training for local programs; training for local program staff; site visits and assessments by technical specialists; local program design assistance and evaluation; and continued local program on-site assistance;

(2) To the extent funds are made available, provide financial assistance to local governments or local organizations to assist in initial program start-up costs, specific project feasibility studies, market studies, and design assistance;

(3) Develop objective criteria for selecting recipients of financial assistance under subsection (1) of this section and providing designation of a local program under section 4 of this act;

(4) Operate the Washington main street program in accordance with the plan developed by the department, in consultation with the Washington main street advisory committee created under section 5 of this act;

(5) Allow certification of local downtown and neighborhood commercial district revitalization programs by local governments with a population greater than one hundred thousand; and

(6) Consider other factors the department deems necessary for the implementation of this chapter.

NEW SECTION. Sec. 4. The department shall, by rule, adopt criteria for the designation of local downtown and neighborhood commercial district revitalization programs and official local main street programs. The categories are limited to: Partner-level, associate-level, and participant-level. In establishing the criteria, the department shall consider:

(1) The degree of interest and commitment to downtown and neighborhood commercial district revitalization and, where applicable, historic preservation by both the public and private sectors;

(2) The evidence of potential private sector investment in the downtown and neighborhood commercial district;

(3) Where applicable, a downtown and neighborhood commercial district with sufficient historic fabric to become a foundation for an enhanced community image;

(4) Organization and financial commitment to implement a long-term downtown and neighborhood commercial district revitalization program that includes a commitment to employ a professional project manager with an operating budget;

(5) The department's existing downtown revitalization services tier system;

(6) The national main street center's criteria for designating official main street cities; and

(7) Other factors the department deems necessary for the designation of a local program.

NEW SECTION. Sec. 5. (1) The Washington main street advisory committee is created within the department. The members of the advisory committee are appointed by the director and consist of:

(a) The director, or the director's designee, who shall serve as chair;

(b) One representative of private industry councils;

(d) The chair of the governor's small business improvement council;

(e) Five representatives from existing main street programs or downtown and neighborhood commercial district programs; and

(f) One representative of the Washington state office of archaeology and historic preservation.

(2) The plan required under section 3 of this act must describe:

(a) The objectives and strategies of the Washington main street program;

(b) How the Washington main street program will be coordinated with existing federal, state, local, and private sector business development and historic preservation efforts;

(d) The methods of selecting and providing assistance to participating local programs; and

(e) A means to solicit private contributions for state and local operations of the Washington main street program.

(3) In addition to the plan required under this chapter, the Washington main street advisory committee must conduct a study on possible financial incentives to encourage the development and retention of businesses located within downtown and neighborhood commercial business districts. The study must contain information on:

(a) Existing state and local financial incentives available to businesses located in downtown and neighborhood commercial business districts;

(b) Financial and tax incentives available in other states to encourage the development or retention of businesses located in downtown and neighborhood commercial business districts;

(4) By November 15, 1997, the Washington main street advisory committee shall submit their report with findings and recommendations to the appropriate legislative committees of the house of representatives and the senate.

NEW SECTION. Sec. 6. The Washington main street trust fund account is created in the state treasury. All receipts from private contributions, federal funds, legislative appropriations, and fees for services, if levied, must be deposited into the account. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used only for the operation of the Washington main street program.

NEW SECTION. Sec. 7. The legislature finds that there is a need to increase economic opportunity in economically distressed communities. The legislature further finds that efforts to increase economic opportunity in economically distressed communities must involve a collaborative effort between community and business development agencies, individual businesses, financial institutions, public sector agencies, institutions of higher education, and community residents. It is the intent of the legislature to support institutions of higher education in the establishment of collaborative efforts to increase economic opportunity in economically distressed communities.

NEW SECTION. Sec. 8. (1) The University of Washington and Washington State University shall conduct a study to:

(a) Analyze the impact of their current economic and business development programs and initiatives on economically distressed communities;

(b) Analyze the economic impacts of their business development and technology transfer programs on creating economic opportunities for African-American, Asian-American, Native American, Asian and Pacific Islander, and Hispanic-American residents of Washington; and

(c) Propose changes and additions to existing economic and business development programs to better serve economically distressed communities and women and minority individuals and business owners.

(2)(a) The University of Washington and Washington State University each shall form an advisory group comprised of representatives from community-based organizations in distressed communities, small business owners, financial institutions, insurance companies, local government, and other interested groups.

(b) The advisory group created in this section shall be responsible for the review of the data found under subsection (1) of this section.

(3) All administrative and clerical staffing for the task force shall be provided by the University of Washington and Washington State University.

(4) By October 15, 1997, the University of Washington and Washington State University shall submit their report with findings and recommendations to the appropriate legislative committees of the house of representatives and the senate.

Sec. 9. RCW 82.62.010 and 1996 c 290 s 5 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax credit under this chapter.

(2) "Department" means the department of revenue.

(3) "Eligible area" means: (a) A county in which the average level of unemployment for the three years before the year in which an application is filed under this chapter exceeds the average state unemployment for those years by twenty percent; (b) a county that has a median household income that is less than seventy-five percent of the state median household income for the previous three years; (c) a metropolitan statistical area, as defined by the office of federal statistical policy and standards, United States department of commerce, in which the average level of unemployment for the calendar year immediately preceding the year in which an application is filed under this chapter exceeds the average state unemployment for such calendar year by twenty percent; (d) a designated community empowerment zone approved under RCW 43.63A.700; or (e) subcounty areas in those counties that are not covered under (a) of this subsection that are timber impact areas as defined in RCW 43.31.601.

(4)(a) "Eligible business project" means manufacturing or research and development activities which are conducted by an applicant in an eligible area at a specific facility, provided the applicant's average full-time qualified employment positions at the specific facility will be ((~~at least fifteen percent~~)) greater in the year for which the credit is being sought than the applicant's average full-time qualified employment positions at the same facility in the immediately preceding year.

(b) "Eligible business project" does not include any portion of a business project undertaken by a light and power business as defined in RCW 82.16.010(5) or that portion of a business project creating qualified full-time employment positions outside an eligible area or those recipients of a sales tax deferral under chapter 82.61 RCW.

(5) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and shall include the production or fabrication of specially made or custom made articles. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.

(6) "Person" has the meaning given in RCW 82.04.030.

(7) "Qualified employment position" means a permanent full-time employee employed in the eligible business project during the entire tax year.

(8) "Tax year" means the calendar year in which taxes are due.

(9) "Recipient" means a person receiving tax credits under this chapter.

(10) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.

Sec. 10. RCW 82.62.030 and 1996 c 1 s 3 are each amended to read as follows:

(1) A person shall be allowed a credit against the tax due under chapter 82.04 RCW as provided in this section. For an application approved before January 1, 1996, the credit shall equal one thousand dollars for each qualified employment position directly created in an eligible business project. For an application approved on or after January 1, 1996, the credit shall equal two thousand dollars for each qualified employment position directly created in an eligible business project.

(2) The department shall keep a running total of all credits granted under this chapter during each fiscal biennium. The department shall not allow any credits which would cause the tabulation for a biennium to exceed fifteen million dollars. If all or part of an application for credit is disallowed under this subsection, the disallowed portion shall be carried over for approval the next biennium. However, the applicant's carryover into the next biennium is only permitted if the tabulation for the next biennium does not exceed fifteen million dollars as of the date on which the department has disallowed the application.

(3) No recipient is eligible for tax credits in excess of ((~~three hundred~~)) two hundred ninety-five thousand dollars per taxable year.

(4) No recipient may use the tax credits to decertify a union or to displace existing jobs in any community in the state.

(5) No recipient may receive a tax credit on taxes which have not been paid during the taxable year.

NEW SECTION. Sec. 11. Sections 1 through 7 of this act may be known and cited as the Washington main street act.

NEW SECTION. Sec. 12. Sections 1 through 7 of this act constitute a new chapter in Title 43 RCW.

NEW SECTION. Sec. 13. 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.