BILL REQ. #:  H-4042.1 

Read first time 01/19/2004.   Referred to Committee on Agriculture & Natural Resources.

     AN ACT Relating to marina lease rates; amending RCW 79.90.480; creating a new section; and declaring an emergency.

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

Sec. 1   RCW 79.90.480 and 2003 c 310 s 1 are each amended to read as follows:
     Except as otherwise provided by this chapter, annual rent rates for the lease of state-owned aquatic lands for water-dependent uses shall be determined as follows:
     (1)(a) The assessed land value, exclusive of improvements, as determined by the county assessor, of the upland tax parcel used in conjunction with the leased area or, if there are no such uplands, of the nearest upland tax parcel used for water-dependent purposes divided by the parcel area equals the upland value.
     (b) The upland value times the area of leased aquatic lands times thirty percent equals the aquatic land value.
     (2) As of July 1, 1989, and each July 1st thereafter, the department shall determine the real capitalization rate to be applied to water-dependent aquatic land leases commencing or being adjusted under subsection (3)(a) of this section in that fiscal year. The real capitalization rate shall be the real rate of return, except that until June 30, 1989, the real capitalization rate shall be five percent and thereafter it shall not change by more than one percentage point in any one year or be more than seven percent or less than three percent.
     (3) The annual rent shall be:
     (a) Determined initially, and redetermined every four years or as otherwise provided in the lease, by multiplying the aquatic land value times the real capitalization rate; and
     (b) Adjusted by the inflation rate each year in which the rent is not determined under subsection (3)(a) of this section.
     (4) If the upland parcel used in conjunction with the leased area is not assessed or has an assessed value inconsistent with the purposes of the lease, the nearest comparable upland parcel used for similar purposes shall be substituted and the lease payment determined in the same manner as provided in this section.
     (5) For the purposes of this section, "upland tax parcel" is a tax parcel, some portion of which has upland characteristics. Filled tidelands or shorelands with upland characteristics which abut state-owned aquatic land shall be considered as uplands in determining aquatic land values.
     (6) The annual rent for filled state-owned aquatic lands that have the characteristics of uplands shall be determined in accordance with RCW 79.90.500 in those cases in which the state owns the fill and has a right to charge for the fill.
     (7)(a) For leases for marina uses only, as of July 1, ((2004)) 2005, lease rates will be a percentage of the annual gross revenues generated by that marina. ((It is the intent of the legislature that additional legislation be enacted prior to July 1, 2004, to establish the percentage of gross revenues that will serve as the basis for a marina's rent and a definition of gross revenues.)) Annual rent must be recalculated each year based upon the marina's gross revenues from the previous year, as reported to the department consistent with this subsection (7).
     (b) ((By December 31, 2003, the department will develop a recommended formula for calculating marina rents consistent with this subsection (7) and report the recommendation to the legislature. The formula recommended by the department must include a percentage or a range of percentages of gross revenues, a system for implementing such percentages, and the designation of revenue sources to be considered for rent calculation purposes. The department must also ensure, given the available information, that the rent formula recommended by the department is initially calculated to maintain state proceeds from marina rents as of July 1, 2003, and that if the department does not receive income reporting forms representing at least ninety percent of the projected annual marina revenue and at least seventy-five percent of all marinas, the current model for calculating marina rents, as described in subsections (1) through (6) of this section, will continue to be the method used to calculate marina rents, and the income method, as described in (a) of this subsection, will not be applied. In addition to the percent of marina income, the department shall determine its direct administrative costs (cost of hours worked directly on applications and leases, based on salaries and benefits, plus travel reimbursement and other actual out-of-pocket costs) to calculate, audit, execute, and monitor marina leases, and shall recover these costs from lessees. All administrative costs recovered by the department must be deposited into the resource management cost account created in RCW 79.64.020. Prior to making recommendations to the legislature, a work session consisting of the department, marina owners, and stakeholders must be convened to discuss the rate-setting criteria. The legislature directs the department to deliver recommendations to the legislature by December 2003, including any minority reports by the participating parties.
     (c) When developing its recommendation for a marina lease formula consistent with this subsection (7), the department shall ensure that the percentage of revenue established is applied to the income of the direct lessee, as well as to the income of any person or entity that subleases, or contracts to operate the marina, with the direct lessee, less the amount paid by the sublease to the direct lessee.
     (d) All marina operators under lease with the department must return to the department an income reporting form, provided by the department, and certified by a licensed certified public accountant, before July 1, 2003, and again)) To aid the department with its responsibility to recalculate the rent of a marina, all marinas under lease with the department must annually, on a date set by the department, return to the department an income reporting form provided by the department and certified by a licensed public accountant. On the income reporting form, the department may require a marina to disclose to the department any information about income from all marina-related sources, excluding restaurants and bars. All income reports submitted to the department are subject to either audit or verification, or both, by the department, and the department may inspect all of the lessee's books, records, and documents, including state and federal income tax returns relating to the operation of the marina and leased aquatic lands at all reasonable times. If the lessee fails to submit the required income reporting form once the new method for calculating marina rents is effective, the department may conduct an audit at the lessee's expense or cancel the lease.
     (((e))) (c) Initially, the marina rent ((formula developed by the department)) calculated pursuant to (((b))) (a) of this subsection will be applied to each marina on its anniversary date, beginning on July 1, ((2004)) 2005, and will be based on that marina's ((2003)) 2004 income information. Thereafter, rents will be recalculated each year, based on the marina's gross revenue from the previous year.
     (((f))) (d) No marina lease may be for less than five hundred dollars plus direct administrative costs.
     (8) For all new leases for other water-dependent uses, issued after December 31, 1997, the initial annual water-dependent rent shall be determined by the methods in subsections (1) through (6) of this section.

NEW SECTION.  Sec. 2   (1) The legislature intends to enact additional legislation prior to July 1, 2005, that establishes the actual percentage of gross revenues generated by a marina that will serve as the rent charged by the department of natural resources, as well as a clear definition of which revenue streams will be considered the gross revenue of a marina for the purposes of calculating rent.
     (2) To aid the 2005 legislature with this task, the department of natural resources shall report to the appropriate committees of the legislature by December 31, 2004, with a recommended formula for calculating marina rents based on a percentage of a marina's gross revenues. The formula recommended by the department of natural resources must include a percentage, or a range of percentages, of gross revenues, a system for implementing such percentages, and the designation of revenue sources to be considered for rent calculation purposes. The department of natural resources must also ensure that the recommended rent formula is initially calculated to maintain state proceeds from marina rents as of July 1, 2004. In addition to the percent of marina income, the department of natural resources's recommended formula shall include a mechanism for the recovery of its direct administrative costs to calculate, audit, execute, and monitor marina leases from lessees. The administrative costs may include the cost of travel reimbursement, other actual out-of-pocket costs, and the cost of hours worked directly on applications and leases, based on the salaries and benefits of employees. The department of natural resources's recommended formula must also ensure that the percentage of revenue established is applied to the income of the direct lessee, as well as to the income of any person or entity that subleases, or contracts to operate the marina, with the direct lessee, less the amount paid by the sublessee to the direct lessee.
     (3) In preparing a recommended formula for the legislature pursuant to this section, the department of natural resources shall rely on marina income data collected under section 1, chapter 310, Laws of 2003.
     (4) Prior to making recommendations to the legislature, a work session consisting of the department of natural resources, marina owners, and stakeholders must be convened to discuss the rate-setting criteria. The report delivered to the legislature should include any minority reports by the parties participating in the work session.

NEW SECTION.  Sec. 3   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.