Washington State House of Representatives Office of Program Research	BILL ANALYSIS
Trade & Economic Development Committee

HB 1418

Brief Description:  Promoting community revitalization.

Sponsors:  Representatives Gombosky, McMorris, Mulliken, Pennington, Ahern, Wood, Ogden, Benson, Reardon, Linville, Haigh, Miloscia, Simpson, McIntire, Santos, Rockefeller and Kessler.

Brief Summary of Bill

$Authorizes a new system of property tax increment financing where tax increment areas may be designated by a county, city or town within which a portion of the receipts from regular property tax levies are diverted away from local governments imposing the property taxes and distributed to the county, city or town to finance community revitalization facilities and programs within the tax increment area.

Hearing Date:  2/13/01

Staff:  Steve Lundin (786‑7127).

Background: 

State voters defeated proposed constitutional amendments in 1973, 1982, and 1985 authorizing counties, cities, and towns to engage in tax increment financing or community redevelopment financing involving the use of property taxes.  Tax increment financing or community redevelopment financing is a method of redistributing property tax collections within designated areas to finance infrastructure improvements within these designated areas.  Enabling legislation was enacted in 1982, along with the constitutional amendment that year, but this enabling legislation was not made contingent on the approval of the constitutional amendment that was defeated that year.

The city of Spokane attempted to use this enabling legislation but the Supreme Court found the statute to be defective in 1995.

Summary of Bill: 

Counties, cities and towns are authorized to create tax increment areas within their boundaries where community revitalization projects and programs are financed by diverting a portion of the regular property taxes imposed by local governments within the tax increment area.

Community revitalization projects and programs include:

$Traditional infrastructure improvements, such as: (1) Street and road construction and maintenance; (2) water and sewer system construction; (3) sidewalks and streetlights; (4) parking, terminal, and dock facilities; (5) public transportation facilities; and (5) park and recreation facilities.

$Any other publicly owned or leased facilities that the city or town has the authority to provide.

$Environmental analysis, professional management, planning, and promotion, management and promotion of retail trade activities, maintenance and security for common areas, and historic preservation.

A county, city or town may pledge and use the diverted regular property tax collections to pay principal and interest on general obligations issued to finance the community revitalization projects and programs.  A nonpublic participant may be required to provide security to protect the public investment in the tax increment area.

Property taxes that are diverted to finance the projects are the regular property taxes imposed within the tax increment area on 75 percent of any increase in assessed valuation occurring in that area after its creation.  Regular property taxes imposed by local governments on all of the remaining value (the assessed valuation in the year before the tax increment area was created plus 25 percent of any increase in assessed valuation in the tax increment area) are distributed as if the tax increment area had not been created.  The state's property taxes are not affected.  Regular property taxes imposed by port districts and public utility districts specifically for bond retirement purposes are not affected.  The county, city or town creating the tax increment finance area may agree to reduce the amount of property taxes that are diverted.

Each local government taxing district authorized to impose regular property taxes is granted the express authority to provide the public improvements financed by a property tax increment financing, but if the taxing district is not otherwise granted this authority, the additional authority is only provided to the extent the taxing district agrees to participate in the tax increment financing.

The projects financed by property tax increment financing must be expected to encourage private development within the tax increment area and increase the fair market value of real property within the tax increment area.  Private development that is anticipated to occur within the tax increment area, as a result of the public improvements, must be consistent with the countywide planning policy adopted by the county under the Growth Management Act and the county=s, city=s or town=s comprehensive plan and development regulations adopted under the Growth Management Act.

Any diversion of county road district regular property tax levies for such purposes without penalizing the distribution of state highway moneys to the county.

Limitations under what is called the 106 percent limitation continue whether or not a tax increment area has been created.

A direct or collateral attack on a tax increment area must be commenced within 30 days of the date the county, city or town publishes a notice that the tax increment area has been created.

The creation of an tax increment area involves a number of steps, as follows:

$The county, city or town adopts an ordinance designating the tax increment area within its boundaries and specifies the public improvements to be financed.

$The tax increment area may not be established unless the taxing districts (not including the state) imposing at least 60 percent of the regular property taxes within this area sign written agreements approving the tax increment financing.

$A public hearing on the proposal is held.

$The county, city or town adopts an ordinance establishing the tax increment finance area.

The ordinance establishing the tax increment area is subject to potential referendum action by county, city or town voters.

Appropriation:  None.

Fiscal Note:  Requested on February 5, 2001.

Effective Date:  Ninety days after adjournment of session in which bill is passed.