READ FIRST TIME 02/07/06.   

     AN ACT Relating to creating the local infrastructure financing tool demonstration program; adding a new section to chapter 82.14 RCW; adding a new chapter to Title 39 RCW; creating new sections; providing an effective date; and providing an expiration date.

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

NEW SECTION.  Sec. 101   INTENT. The legislature recognizes that the state as a whole benefits from investment in public infrastructure because it promotes community and economic development. Public investment stimulates business activity and helps create jobs; stimulates the redevelopment of brownfields and blighted areas in the inner city; lowers the cost of housing; and promotes efficient land use. The legislature finds that these activities generate revenue for the state and that it is in the public interest to invest in these projects through a credit against the state sales and use tax and an allocation of property tax revenue to those sponsoring local governments that can demonstrate the expected returns to the state.

NEW SECTION.  Sec. 102   DEFINITIONS. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Annual state contribution limit" means five million dollars statewide per fiscal year.
     (2) "Assessed value" means the valuation of taxable real property as placed on the last completed assessment roll.
     (3) "Base year" means the first calendar year following the creation of a revenue development area.
     (4) "Board" means the community economic revitalization board under chapter 43.160 RCW.
     (5) "Department" means the department of revenue.
     (6) "Fiscal year" means the twelve-month period beginning July 1st and ending the following June 30th.
     (7) "Local excise taxes" means local revenues derived from the imposition of sales and use taxes authorized in RCW 82.14.030 at the tax rate that was in effect at the time the revenue development area was created.
     (8) "Local excise tax allocation revenue" means the amount of local excise taxes received by the local government during the measurement year from taxable activity within the revenue development area over and above the amount of local excise taxes received by the local government during the base year from taxable activity within the revenue development area, except that:
     (a) If a sponsoring local government creates a revenue development area and reasonably determines that no activity subject to tax under chapters 82.08 and 82.12 RCW occurred in the twelve months immediately preceding the creation of the revenue development area within the boundaries of the area that became the revenue development area, "local excise tax allocation revenue" means the entire amount of local excise taxes received by the sponsoring local government during a calendar year period beginning with the calendar year immediately following the creation of the revenue development area and continuing with each measurement year thereafter; and
     (b) For revenue development areas created in calendar year 2006 that do not meet the requirements in (a) of this subsection, "local excise tax allocation revenue" means the amount of local excise taxes received by the sponsoring local government during the measurement year from taxable activity within the revenue development area over and above an amount of local excise taxes received by the sponsoring local government during the 2007 base year adjusted by the department for any estimated impacts from retail sales and use tax sourcing changes effective July 1, 2007. The amount of base year adjustment determined by the department is final.
     (9) "Local government" means any city, town, county, port district, and for the purpose of this chapter any federally recognized Indian tribe.
     (10) "Local infrastructure financing" means the use of revenues received from local excise tax allocation revenues, local property tax allocation revenues, dedicated revenues from local public sources, and revenues received from the local option sales and use tax authorized in section 202 of this act to pay the principal and interest on bonds authorized under section 501 of this act.
     (11) "Local property tax allocation revenue" means those tax revenues derived from the receipt of regular property taxes levied on the property tax allocation revenue value and used for local infrastructure financing.
     (12) "Local public sources" means federal and private monetary contributions, and amounts of local excise tax allocation revenues dedicated by participating local governments and local property tax allocation revenues dedicated by participating taxing districts.
     (13) "Low-income housing" means residential housing for persons or families who lack the amount of income which is necessary to enable them, without financial assistance, to live in decent, safe, and sanitary dwellings, without overcrowding.
     (14) "Measurement year" means a calendar year, beginning with the calendar year following the base year and each calendar year thereafter, that is used annually to measure state and local excise tax allocation revenues.
     (15) "Ordinance" means any appropriate method of taking legislative action by a local government.
     (16) "Participating local government" means a local government with the revenue development area within its geographic boundaries that has entered into a written agreement with a sponsoring local government to allow the use of all or some of its local excise tax allocation revenues or dedicated revenues from local public sources for local infrastructure financing.
     (17) "Participating taxing district" means any taxing district levying regular property taxes on real property within a revenue development area, where a sponsoring local government has obtained written agreement for the use of local infrastructure financing to finance all or a portion of the costs of designated public improvements as provided in section 205 of this act.
     (18) "Property tax allocation revenue value" means seventy-five percent of any increase in the assessed value of real property in a revenue development area due to the placement of new construction and improvements to property on the assessment rolls after the revenue development area is created, where the new construction or improvements occur entirely after the revenue development area is created. "Property tax allocation revenue value" does not include any increase in the assessed value of real property representing new construction and improvements to property occurring after their initial placement on the assessment rolls, except that for new construction which represents entire buildings, allocation revenue value includes seventy-five percent of any increase in the assessed value of such new construction in the years following its initial placement on the assessment rolls. There is no property tax allocation revenue value if the assessed value of real property in a revenue development area has not increased due to new construction and improvements to property occurring after the revenue development area is created.
     (19) "Property taxing district" means a government entity that levies or has levied for it regular property taxes upon real property located within a proposed or approved revenue development area.
     (20) "Public improvements" means:
     (a) Infrastructure improvements within the revenue development area that include:
     (i) Street, bridge, and road construction and maintenance;
     (ii) Water and sewer system construction and improvements;
     (iii) Sidewalks, traffic controls, and streetlights;
     (iv) Parking, terminal, and dock facilities;
     (v) Park and ride facilities of a transit authority;
     (vi) Park facilities and recreational areas; and
     (vii) Storm water and drainage management systems;
     (b) Expenditures for facilities and improvements that support affordable housing as defined in RCW 43.63A.510.
     (21) "Public improvement costs" means the cost of: (a) Design, planning, acquisition including land acquisition, site preparation including land clearing, construction, reconstruction, rehabilitation, improvement, and installation of public improvements; (b) demolishing, relocating, maintaining, and operating property pending construction of public improvements; (c) the local government's portion of relocating utilities as a result of public improvements; (d) financing public improvements, including interest during construction, legal and other professional services, taxes, insurance, principal and interest costs on general indebtedness issued to finance public improvements, and any necessary reserves for general indebtedness; (e) assessments incurred in revaluing real property for the purpose of determining the property tax allocation revenue base value that are in excess of costs incurred by the assessor in accordance with the revaluation plan under chapter 84.41 RCW, and the costs of apportioning the taxes and complying with this chapter and other applicable law; and (f) administrative expenses and feasibility studies reasonably necessary and related to these costs, including related costs that may have been incurred before adoption of the ordinance authorizing the public improvements and the use of local infrastructure financing to fund the costs of the public improvements.
     (22) "Regular property taxes" means regular property taxes as defined in RCW 84.04.140, except: (a) Regular property taxes levied by public utility districts specifically for the purpose of making required payments of principal and interest on general indebtedness; (b) regular property taxes levied by the state for the support of the common schools under RCW 84.52.065; and (c) regular property taxes authorized by RCW 84.55.050 that are limited to a specific purpose. "Regular property taxes" do not include excess property tax levies that are exempt from the aggregate limits for junior and senior taxing districts as provided in RCW 84.52.043.
     (23) "Property tax allocation revenue base value" means the assessed value of real property located within a revenue development area for taxes levied in the year in which the revenue development area is created for collection in the following year, plus one hundred percent of any increase in the assessed value of real property located within a revenue development area that is placed on the assessment rolls after the revenue development area is created, less the property tax allocation revenue value.
     (24) "Relocating a business" means the closing of a business and the reopening of that business, or the opening of a new business that engages in the same activities as the previous business, in a different location within a one-year period, when an individual or entity has an ownership interest in the business at the time of closure and at the time of opening or reopening. "Relocating a business" does not include the closing and reopening of a business in a new location where the business has been acquired and is under entirely new ownership at the new location, or the closing and reopening of a business in a new location as a result of the exercise of the power of eminent domain.
     (25) "Revenue development area" means the geographic area created by a sponsoring local government from which local tax allocation revenues are derived for local infrastructure financing.
     (26) "Small business" has the same meaning as provided in RCW 19.85.020.
     (27) "Sponsoring local government" means a city, town, or county, and for the purpose of this chapter a federally recognized Indian tribe or any combination thereof, that creates a revenue development area and applies to the board to use local infrastructure financing.
     (28) "State contribution" means the lesser of one million dollars or an amount equal to:
     (a) The state excise tax allocation revenue and state property tax allocation revenue received by the state during the preceding calendar year;
     (b) The amount of local excise tax allocation revenues, local property tax allocation revenues, and revenues from local public sources that are dedicated by a sponsoring local government in the preceding calendar year to the payment of principal and interest on bonds issued under section 501 of this act; or
     (c) The amount of project award granted by the board in the notice of approval to use local infrastructure financing under section 202 of this act.
     (29) "State excise taxes" means revenues derived from state retail sales and use taxes under chapters 82.08 and 82.12 RCW, less the amount of tax distributions from all taxes imposed on the same taxable events that are credited against the state taxes under chapters 82.08 and 82.12 RCW.
     (30) "State excise tax allocation revenue" means the amount of state excise taxes received by the state during the measurement year from taxable activity within the revenue development area over and above the amount of state excise taxes received by the state during the base year from taxable activity within the revenue development area, except that:
     (a) If a sponsoring local government creates a revenue development area and reasonably determines that no activity subject to tax under chapters 82.08 and 82.12 RCW occurred in the twelve months immediately preceding the creation of the revenue development area within the boundaries of the area that became the revenue development area, "state excise tax allocation revenue" means the entire amount of state excise taxes received by the state during a calendar year period beginning with the calendar year immediately following the creation of the revenue development area and continuing with each measurement year thereafter; and
     (b) For revenue development areas created in calendar year 2006 that do not meet the requirements in (a) of this subsection, "local excise tax allocation revenue" means the amount of state excise taxes received by the state during the measurement year from taxable activity within the revenue development area over and above an amount of state excise taxes received by the state during the 2007 base year adjusted by the department for any estimated impacts from retail sales and use tax sourcing changes effective July 1, 2007. The amount of base year adjustment determined by the department is final.
     (31) "State property tax allocation revenue" means those tax revenues derived from the imposition of property taxes levied by the state for the support of common schools under RCW 84.52.065 on the property tax allocation revenue value.
     (32) "Taxing authority" means a governmental entity that imposes a sales or use tax under chapter 82.14 RCW upon the occurrence of any taxable event within a proposed or approved revenue development area.
     (33) "Urban growth area" has the same meaning as provided in chapter 36.70A RCW.

NEW SECTION.  Sec. 201   CREATION OF THE LOCAL INFRASTRUCTURE FINANCING TOOL PROGRAM. The local infrastructure financing tool program is created to assist local governments in financing authorized public infrastructure projects designed to promote economic development in the jurisdiction. The local infrastructure financing tool program is not created to enable existing Washington-based businesses from outside a revenue development area to relocate into a revenue development area.

NEW SECTION.  Sec. 202   LOCAL INFRASTRUCTURE FINANCING TOOL PROGRAM APPLICATION. (1) Prior to applying to the board to use local infrastructure financing, a sponsoring local government shall:
     (a) Designate a revenue development area within the limitations in section 203 of this act;
     (b) Certify that the conditions in section 204 of this act are met;
     (c) Complete the process in section 205 of this act;
     (d) Provide public notice as required in section 207 of this act; and
     (e) Pass an ordinance adopting the revenue development area as required in section 206 of this act.
     (2) As a condition to imposing a sales and use tax under section 401 of this act, a city, town, or county must apply to the board at least one hundred fifty days before the effective date of any such tax. The application shall be in a form and manner prescribed by the board and shall include, but is not limited to, information establishing that the applicant is eligible to impose such a tax, the anticipated effective date for imposing the tax, the estimated number of years that the tax will be imposed, and the estimated amount of tax revenue to be received in each fiscal year that the tax will be imposed. The board shall make available forms to be used for this purpose. As part of the application, a city, town, or county must provide to the board a copy of the ordinance creating the revenue development area as required in section 206 of this act. The board shall rule on completed applications within sixty days of receipt. The board may begin accepting and approving applications August 1, 2006. No new applications shall be considered by the board after the thirtieth day of September of the third year following the year in which the first application was received by the board.
     (3) The board shall establish a competitive process to prioritize applications and shall approve any tax that may be imposed under section 401 of this act. The board shall consult with the department of revenue in approving a proposed tax.
     (4) The board shall apply the following criteria for evaluation and ranking of applications:
     (a) The relative benefits provided to the community by the proposed economic or community development, including employment;
     (b) The present level of economic activity in the community and the existing local financial capacity to increase economic activity in the community;
     (c) The rate of return of the state's investment, that includes the expected increase in state and local tax revenues associated with the project;
     (d) The lack of another timely source of funding available to finance the project which would likely prevent the proposed community or economic development, absent the financing available under this act;
     (e) The ability of the project to improve the viability of existing business entities in the project area;
     (f) Whether or not the project is a partnership of multiple jurisdictions;
     (g) Demonstration that the requested assistance will directly stimulate community and economic development by facilitating the creation of new jobs or the retention of existing jobs; and
     (h) The availability of existing assets that applicants may apply to projects.
     (5)(a) A proposed tax may not be approved unless the applicant has entered into or expects to enter into a contract with a private developer relating to private investment that will result in the creation or retention of jobs upon completion of the project; and
     (b) A proposed tax may not be approved if the expected development will result in the relocation of jobs from another part of the state into the revenue development area.
     (6) As a part of the approval of applications under this section, the board shall approve the project award, the amount of tax under section 401 of this act, that an applicant may impose. The board shall consult with the department in determining the amount. The amount of tax approved by the board shall not exceed the lesser of one million dollars or the average amount of tax revenue that the applicant estimates that it will receive in all fiscal years through the imposition of the sales and use tax under section 401 of this act. A city, town, or county shall not receive, in any fiscal year, more revenues from taxes imposed under section 401 of this act than the amount approved by the board. The board shall not approve the receipt of more credit against the state sales and use tax than is authorized under subsection (7) of this section.
     (7) No more than five million dollars of credit against the state sales and use tax may be received by all cities, towns, and counties in any fiscal year.
     (8) The credit against the state sales and use tax shall be available to any city, town, or county imposing a tax under section 401 of this act only as long as the city, town, or county has outstanding indebtedness under section 501 of this act.

NEW SECTION.  Sec. 203   LIMITATIONS ON REVENUE DEVELOPMENT AREAS. The designation of a revenue development area is subject to the following limitations:
     (1) The taxable real property within the revenue development area boundaries may not exceed one billion dollars in assessed value at the time the revenue development area is designated;
     (2) The average assessed value per square foot of taxable land within the revenue development area boundaries may not exceed seventy dollars at the time the revenue development area is designated;
     (3) No more than one revenue development area may be created in a county;
     (4) A revenue development area is limited to contiguous tracts, lots, pieces, or parcels of land without the creation of islands of property not included in the revenue development area;
     (5) The boundaries may not be drawn to purposely exclude parcels where economic growth is unlikely to occur;
     (6) The public improvements financed through local infrastructure financing must be located in the revenue development area;
     (7) A revenue development area cannot comprise an area containing more than twenty-five percent of the total assessed value of the taxable real property within the boundaries of the sponsoring local government, including any cosponsoring local government, at the time the revenue development area is designated; and
     (8) The boundaries of the revenue development area shall not be changed for the time period that local infrastructure financing is used.

NEW SECTION.  Sec. 204   CONDITIONS. The use of local infrastructure financing under this chapter is subject to the following conditions:
     (1) No funds may be used to finance, design, acquire, construct, equip, operate, maintain, remodel, repair, or reequip public facilities funded with taxes collected under RCW 82.14.048;
     (2)(a) Except as provided in (b) of this subsection no funds may be used for public improvements other than projects identified within the capital facilities, utilities, housing, or transportation element of a comprehensive plan required under chapter 36.70A RCW;
     (b) Funds may be used for public improvements that are historical preservation activities as defined in RCW 39.89.020;
     (3) The public improvements proposed to be financed in whole or in part using local infrastructure financing are expected to encourage private development within the revenue development area and to increase the fair market value of real property within the revenue development area;
     (4) A sponsoring local government or participating local government has entered or expects to enter into a contract with a private developer relating to the development of private improvements within the revenue development area or has received a letter of intent from a private developer relating to the developer's plans for the development of private improvements within the revenue development area;
     (5) Private development that is anticipated to occur within the revenue development area, as a result of the public improvements, will be consistent with the countywide planning policy adopted by the county under RCW 36.70A.210 and the local government's comprehensive plan and development regulations adopted under chapter 36.70A RCW;
     (6) The governing body of the sponsoring local government must make a finding that local infrastructure financing:
     (a) Is not expected to be used for the purpose of relocating a business from outside the revenue development area, but within this state, into the revenue development area; and
     (b) Will improve the viability of existing business entities within the revenue development area;
     (7) The governing body of the sponsoring local government finds that the public improvements proposed to be financed in whole or in part using local infrastructure financing are reasonably likely to:
     (a) Increase private residential and commercial investment within the revenue development area;
     (b) Increase employment within the revenue development area;
     (c) Improve the viability of existing communities that are based on mixed-use development within the revenue development area; and
     (d) Generate, over the period of time that the local option sales and use tax will be imposed under section 401 of this act, state excise tax allocation revenues and state property tax allocation revenues derived from the revenue development area that are equal to or greater than the respective state contributions made under this chapter;
     (8) The sponsoring local government may only use local infrastructure financing in areas deemed in need of economic development or redevelopment within boundaries of the sponsoring local government.

NEW SECTION.  Sec. 205   PROCESS. Before adopting an ordinance creating the revenue development area, a sponsoring local government must:
     (1) Obtain written agreement from any participating local government and participating taxing district to use dedicated amounts of revenues from local public sources, local excise tax allocation revenues, and local property tax allocation revenues, in whole or in part, for local infrastructure financing authorized under this chapter. The agreement to opt into the local infrastructure financing public improvement project must be authorized by the governing body of such participating local government and participating taxing district;
     (2) Estimate the impact of the revenue development area on small business and low-income housing and develop a mitigation plan for the impacted businesses and housing. In analyzing the impact of the revenue development area, the sponsoring local government must develop:
     (a) An inventory of existing low-income housing units, and businesses and retail activity within the revenue development area;
     (b) A reasonable estimate of the number of low-income housing units, small businesses, and other commercial activity that may be vulnerable to displacement within the revenue development area;
     (c) A reasonable estimate of projected net job growth and net housing growth caused by creation of the revenue development area when compared to the existing jobs or housing balance for the area; and
     (d) A reasonable estimate of the impact of net housing growth on the current housing price mix.

NEW SECTION.  Sec. 206   ORDINANCE. (1) To create a revenue development area, a sponsoring local government must adopt an ordinance establishing the revenue development area that:
     (a) Describes the public improvements proposed to be made in the revenue development area;
     (b) Describes the boundaries of the revenue development area, subject to the limitations in section 203 of this act;
     (c) Estimates the cost of the proposed public improvements and the portion of these costs to be financed by local infrastructure financing;
     (d) Estimates the time during which local excise tax allocation revenues, local property tax allocation revenues, and revenues from local public sources are to be used for local infrastructure financing;
     (e) Provides the date when the use of local excise tax allocation revenues and local property tax allocation revenues will commence; and
     (f) Finds that the conditions in section 204 of this act are met and the findings in section 205 of this act are complete.
     (2) The sponsoring local government must hold a public hearing on the proposed financing of the public improvements in whole or in part with local infrastructure financing at least thirty days before passage of the ordinance establishing the revenue development area. The public hearing may be held by either the governing body of the sponsoring local government, or by a committee of that governing body that includes at least a majority of the whole governing body. The public hearing is subject to the notice requirements in section 207 of this act.
     (3) The sponsoring local government shall deliver a certified copy of the adopted ordinance to the county treasurer, the governing body of each participating local government within which the revenue development area is located, the board, and the department.

NEW SECTION.  Sec. 207   NOTICE REQUIREMENTS. Prior to adopting the ordinance creating the revenue development area and to meet the requirements of section 501(1)(b) of this act, a sponsoring local government must provide public notice.
     (1) Notice of the public hearing must be published in a legal newspaper of general circulation within the proposed revenue development area at least ten days before the public hearing and posted in at least six conspicuous public places located in the proposed revenue development area.
     (2) Notice must also be sent by United States mail to the property owners, all identifiable community-based organizations with involvement in the proposed revenue development area, and the business enterprises located within the proposed revenue development area at least thirty days prior to the hearing. In implementing provisions under this chapter, the local governing body may also consult with community-based groups, business organizations, including the local chamber of commerce, and the office of minority and women's business enterprises to assist with providing appropriate notice to business enterprises and property owners for whom English is a second language.
     (3) Notices must describe the contemplated public improvements, estimate the public improvement costs, describe the portion of the public improvement costs to be borne by local infrastructure financing, describe any other sources of revenue to finance the public improvements, describe the boundaries of the proposed revenue development area, estimate the impact that the public improvements will have on small businesses and low-income housing, and estimate the period during which local infrastructure financing is contemplated to be used.
     (4) Notices must inform the public where to obtain the information that shows how the limitations, conditions, and findings required in sections 203 through 205 of this act are met.
     (5) The sponsoring local government shall deliver a certified copy of the proposed ordinance to the county treasurer, the governing body of each participating local government within which the revenue development area is located, the board, and the department.

NEW SECTION.  Sec. 301   LOCAL EXCISE TAX ALLOCATION REVENUES. (1) A sponsoring local government or participating local government may use annually its local excise tax allocation revenues to finance public improvements in the revenue development area financed in whole or in part by local infrastructure financing. The use of local excise tax allocation revenues dedicated by participating local governments must cease when such allocation revenues are no longer necessary or obligated to pay bonds issued to finance the public improvements in the revenue development area. Any participating taxing authority is authorized to dedicate local excise tax allocation revenues to the sponsoring local government as authorized in section 205(1) of this act.
     (2) A sponsoring local government shall provide the board and the department accurate information describing the geographical boundaries of the revenue development area at the time of application. The information shall be provided in an electronic format or manner as prescribed by the department. The sponsoring local government shall ensure that the boundary information provided to the board and the department is kept current.
     (3) In the event a city annexes a county area located within a county-sponsored revenue development area, the city shall remit to the county the portion of the local excise tax allocation revenue that the county would have received had the area not been annexed to the county. The city shall remit such revenues until such time as the bonds issued under section 501 of this act are retired.

NEW SECTION.  Sec. 302   LOCAL PROPERTY TAX ALLOCATION REVENUES. (1) Commencing in the second calendar year following the passage of the ordinance creating a revenue development area and authorizing the use of local infrastructure financing, the county treasurer shall distribute receipts from regular taxes imposed on real property located in the revenue development area as follows:
     (a) Each participating taxing district and the sponsoring local government shall receive that portion of its regular property taxes produced by the rate of tax levied by or for the taxing district on the property tax allocation revenue base value for that local infrastructure financing project in the taxing district, or upon the total assessed value of real property in the taxing district, whichever is smaller; and
     (b) The sponsoring local government shall receive an additional portion of the regular property taxes levied by it and by or for each participating taxing district upon the property tax allocation revenue value within the revenue development area. However, if there is no property tax allocation revenue value, the sponsoring local government shall not receive any additional regular property taxes under this subsection (1)(b). The sponsoring local government may agree to receive less than the full amount of the additional portion of regular property taxes under this subsection (1)(b) as long as bond debt service, reserve, and other bond covenant requirements are satisfied, in which case the balance of these tax receipts shall be allocated to the participating taxing districts that levied regular property taxes, or have regular property taxes levied for them, in the revenue development area for collection that year in proportion to their regular tax levy rates for collection that year. The sponsoring local government may request that the treasurer transfer this additional portion of the property taxes to its designated agent. The portion of the tax receipts distributed to the sponsoring local government or its agent under this subsection (1)(b) may only be expended to finance public improvement costs associated with the public improvements financed in whole or in part by local infrastructure financing.
     (2) The county assessor shall allocate any increase in the assessed value of real property occurring in the revenue development area to the property tax allocation revenue value and property tax allocation revenue base value as appropriate. This section does not authorize revaluations of real property by the assessor for property taxation that are not made in accordance with the assessor's revaluation plan under chapter 84.41 RCW or under other authorized revaluation procedures.
     (3) The apportionment of increases in assessed valuation in a revenue development area, and the associated distribution to the sponsoring local government of receipts from regular property taxes that are imposed on the property tax allocation revenue value, must cease when property tax allocation revenues are no longer necessary or obligated to pay the costs of the public improvements. Any excess local property tax allocation revenues derived from regular property taxes and earnings on these tax allocation revenues, remaining at the time the apportionment of tax receipts terminates, must be returned to the county treasurer and distributed to the participating taxing districts that imposed regular property taxes, or had regular property taxes imposed for it, in the revenue development area for collection that year, in proportion to the rates of their regular property tax levies for collection that year.

NEW SECTION.  Sec. 401   A new section is added to chapter 82.14 RCW to read as follows:
     SALES AND USE TAX. (1) A sponsoring local government that has been approved by the board to use local infrastructure financing may impose a sales and use tax in accordance with the terms of this chapter and subject to the criteria set forth in this section. Except as provided in this section, the tax is in addition to other taxes authorized by law and shall be collected from those persons who are taxable by the state under chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the taxing jurisdiction of the sponsoring local government. The rate of tax shall not exceed the rate provided in RCW 82.08.020(1), less the aggregate rates of any other local sales and use taxes imposed on the same taxable events that are credited against the state sales and use taxes imposed under chapters 82.08 and 82.12 RCW. The rate of tax may be changed only on the first day of a fiscal year as needed. Notice of rate changes must be provided to the department on the first day of March to be effective on July 1st of the next fiscal year.
     (2) The tax authorized under subsection (1) of this section shall be credited against the state taxes imposed under chapter 82.08 or 82.12 RCW. The department shall perform the collection of such taxes on behalf of the sponsoring local government at no cost to the sponsoring local government and shall remit the taxes as provided in RCW 82.14.060.
     (3) No tax may be imposed under this section before July 1, 2008, and before approval by the board under section 202 of this act. Before imposing a tax under this section, the sponsoring local government shall first have received both local excise tax allocation revenues and local property tax allocation revenues during the preceding calendar year. The tax imposed under this section shall expire when the bonds issued under the authority of section 501 of this act are retired, but not more than twenty-five years after the tax is first imposed.
     (4) An ordinance adopted by the legislative authority of a sponsoring local government imposing a tax under this section shall provide that:
     (a) The tax shall first be imposed on the first day of a fiscal year;
     (b) The amount of tax received by the sponsoring local government in any fiscal year shall not exceed the amount of the state contribution;
     (c) The tax shall cease to be distributed for the remainder of any fiscal year in which either:
     (i) The amount of tax received by the sponsoring local government equals the amount of the state contribution;
     (ii) The amount of revenue from taxes imposed under this section by all cities and counties equals the annual state contribution limit; or
     (iii) The amount of tax received by the sponsoring local government equals the amount of project award granted in the approval notice described in section 202 of this act;
     (d) Neither the local excise tax allocation revenues nor the local property tax allocation revenues can be more than eighty percent of the total local funds used to earn the state contribution;
     (e) The tax shall be distributed again, should it cease to be distributed for any of the reasons provided in (c) of this subsection, at the beginning of the next fiscal year, subject to the restrictions in this section; and
     (f) Any revenue generated by the tax in excess of the amounts specified in (c) of this subsection shall belong to the state of Washington.
     (5) If a county and city cosponsor a revenue development area, the combined rates of tax shall not exceed the rate provided in RCW 82.08.020(1), less the aggregate rates of any other local sales and use taxes imposed on the same taxable events that are credited against the state sales and use taxes imposed under chapters 82.08 and 82.12 RCW.
     (6) The department shall determine the amount of tax receipts distributed to each sponsoring local government imposing sales and use tax under this section and shall advise a sponsoring local government when tax distributions for the fiscal year equal the amount of state contribution for that fiscal year as provided in subsection (8) of this section. Determinations by the department of the amount of tax distributions attributable to each sponsoring local government are final and shall not be used to challenge the validity of any tax imposed under this section. The department shall remit any tax receipts in excess of the amounts specified in subsection (4)(c) of this section to the state treasurer who shall deposit the money in the general fund.
     (7) If a sponsoring local government fails to comply with section 403 of this act, no tax may be distributed in the subsequent fiscal year until such time as the sponsoring local government complies and the department calculates the state contribution amount for such fiscal year.
     (8) Each year, the amount of taxes approved by the board for distribution to a sponsoring local government in the next fiscal year shall be the lesser of the amount of the project award in the approval notice described in section 202 of this act or the amount equal to the state contribution. The board shall consider information from reports described in section 403 of this act when determining the amount of state contributions for each fiscal year. A sponsoring local government shall not receive, in any fiscal year, more revenues from taxes imposed under the authority of this section than the amount approved annually by the board. The board shall not approve the receipt of more distributions of sales and use tax under this section to a sponsoring local government than is authorized under subsection (3) of this section.
     (9) The amount of tax distributions received from taxes imposed under the authority of this section by all sponsoring local governments is limited annually to not more than five million dollars. The tax distributions shall be available to the sponsoring local government imposing a tax under this section only as long as the sponsoring local government has outstanding indebtedness under section 501 of this act.
     (10) The definitions in section 102 of this act apply to this section unless the context clearly requires otherwise.

NEW SECTION.  Sec. 402   USE OF FUNDS. Money collected from the taxes imposed under section 401 of this act shall be used only for the purpose of principal and interest payments on bonds issued under the authority of section 501 of this act.

NEW SECTION.  Sec. 403   REPORTING REQUIREMENTS. (1) A sponsoring local government shall provide a report to the board by March 1st of each year. The report shall contain the following information:
     (a) The amount of local excise tax allocation revenues, and local property tax allocation revenues, taxes under section 401 of this act, and revenues from local public sources received by the sponsoring local government during the preceding calendar year that were dedicated to pay the public improvements financed in whole or in part with local infrastructure financing, and a summary of how these revenues were expended;
     (b) The names of any businesses locating within the revenue development area as a result of the public improvements undertaken by the sponsoring local government and financed in whole or in part with local infrastructure financing;
     (c) The total number of permanent jobs created in the revenue development area as a result of the public improvements undertaken by the sponsoring local government and financed in whole or in part with local infrastructure financing;
     (d) The average wages and benefits received by all employees of businesses locating within the revenue development area as a result of the public improvements undertaken by the sponsoring local government and financed in whole or in part with local infrastructure financing; and
     (e) That the sponsoring local government is in compliance with section 204 of this act.
     (2) The board shall make a report available to the public and the legislature by June 1st of each year. The report shall include a list of public improvements undertaken by sponsoring local governments and financed in whole or in part with local infrastructure financing and it shall also include a summary of the information provided to the board by sponsoring local governments under subsection (1) of this section.

NEW SECTION.  Sec. 501   BOND ISSUANCE. (1) A sponsoring local government that has designated a revenue development area and been authorized the use of local infrastructure financing may incur general indebtedness, and issue general obligation bonds, to finance the public improvements and retire the indebtedness in whole or in part from tax allocation revenues it receives, subject to the following requirements:
     (a) The ordinance adopted by the sponsoring local government and authorizing the use of local infrastructure financing indicates an intent to incur this indebtedness and the maximum amount of this indebtedness that is contemplated; and
     (b) The local government includes this statement of the intent in all notices required by section 206 of this act.
     (2)(a) Except as provided in (b) of this subsection, the general indebtedness incurred under subsection (1) of this section may be payable from other tax revenues, the full faith and credit of the local government, and nontax income, revenues, fees, and rents from the public improvements, as well as contributions, grants, and nontax money available to the local government for payment of costs of the public improvements or associated debt service on the general indebtedness.
     (b) A local government that issues bonds under this section shall not pledge any money received from the state of Washington for the payment of such bonds, other than the local sales and use taxes imposed under the authority of section 401 of this act and collected by the department.
     (3) In addition to the requirements in subsection (1) of this section, a local government designating a revenue development area and authorizing the use of local infrastructure financing may require the nonpublic participant to provide adequate security to protect the public investment in the public improvement within the revenue development area.
     (4) Bonds issued under this section shall be authorized by ordinance of the local governing body and may be issued in one or more series and shall bear such date or dates, be payable upon demand or mature at such time or times, bear interest at such rate or rates, be in such denomination or denominations, be in such form either coupon or registered as provided in RCW 39.46.030, carry such conversion or registration privileges, have such rank or priority, be executed in such manner, be payable in such medium of payment, at such place or places, and be subject to such terms of redemption with or without premium, be secured in such manner, and have such other characteristics, as may be provided by such ordinance or trust indenture or mortgage issued pursuant thereto.
     (5) The local government may annually pay into a fund to be established for the benefit of bonds issued under this section a fixed proportion or a fixed amount of any local excise tax allocation revenues and local property tax allocation revenues derived from property or business activity within the revenue development area containing the public improvements funded by the bonds, such payment to continue until all bonds payable from the fund are paid in full. The local government may also annually pay into the fund established in this section a fixed proportion or a fixed amount of any revenues derived from taxes imposed under section 401 of this act, such payment to continue until all bonds payable from the fund are paid in full. Revenues derived from taxes imposed under section 401 of this act are subject to the use restriction in section 402 of this act.
     (6) In case any of the public officials of the local government whose signatures appear on any bonds or any coupons issued under this chapter shall cease to be such officials before the delivery of such bonds, such signatures shall, nevertheless, be valid and sufficient for all purposes, the same as if such officials had remained in office until such delivery. Any provision of any law to the contrary notwithstanding, any bonds issued under this chapter are fully negotiable.
     (7) Notwithstanding subsections (4) through (6) of this section, bonds issued under this section may be issued and sold in accordance with chapter 39.46 RCW.

NEW SECTION.  Sec. 502   USE OF TAX REVENUE FOR BOND REPAYMENT. A sponsoring local government that issues bonds under section 501 of this act to finance public improvements may pledge for the payment of such bonds all or part of any local excise tax allocation revenues and all or part of any local property tax allocation revenues dedicated by the sponsoring local government, any participating taxing authority, or participating taxing district. The local government may also pledge all or part of any revenues derived from taxes imposed under section 401 of this act and held in connection with the public improvements. All of such tax revenues are subject to the use restrictions in sections 202 through 204 of this act, and the process requirements in section 205(1) of this act.

NEW SECTION.  Sec. 503   BONDS ISSUED NOT AN OBLIGATION OF THE STATE OF WASHINGTON. The bonds issued by a sponsoring local government under section 501 of this act to finance public improvements shall not constitute an obligation of the state of Washington, either general or special.

NEW SECTION.  Sec. 504   GENERAL INDEBTEDNESS--SECURITY. (1) A sponsoring local government designating a revenue development area and authorizing the use of local infrastructure financing may incur general indebtedness, and issue general obligation bonds, to finance the public improvements and retire the indebtedness in whole or in part from local excise tax allocation revenues and local property tax allocation revenues it receives, subject to the following requirements:
     (a) The ordinance adopted by the sponsoring local government creating the revenue development area and authorizing the use of local infrastructure financing indicates an intent to incur this indebtedness and the maximum amount of this indebtedness that is contemplated; and
     (b) The sponsoring local government includes this statement of the intent in all notices required by sections 204 and 205 of this act.
     (2) The general indebtedness incurred under subsection (1) of this section may be payable from other tax revenues, the full faith and credit of the sponsoring local government, and nontax income, revenues, fees, and rents from the public improvements, as well as contributions, grants, and nontax money available to the sponsoring local government for payment of costs of the public improvements or associated debt service on the general indebtedness.
     (3) In addition to the requirements in subsection (1) of this section, a sponsoring local government designating a revenue development area and authorizing the use of local infrastructure financing may require the nonpublic participant to provide adequate security to protect the public investment in the public improvement within the revenue development area.

NEW SECTION.  Sec. 505   REVENUE BONDS. (1) A sponsoring local government may issue revenue bonds to fund revenue-generating public improvements, or portions of public improvements, that are located within a revenue development area. Whenever revenue bonds are to be issued, the legislative authority of the sponsoring local government shall create or have created a special fund or funds from which, along with any reserves created pursuant to RCW 39.44.140, the principal and interest on these revenue bonds shall exclusively be payable. The legislative authority of the sponsoring local government may obligate the sponsoring local government to set aside and pay into the special fund or funds a fixed proportion or a fixed amount of the revenues from the public improvements that are funded by the revenue bonds. This amount or proportion is a lien and charge against these revenues, subject only to operating and maintenance expenses. The sponsoring local government shall have due regard for the cost of operation and maintenance of the public improvements that are funded by the revenue bonds, and shall not set aside into the special fund or funds a greater amount or proportion of the revenues that in its judgment will be available over and above the cost of maintenance and operation and the amount or proportion, if any, of the revenue previously pledged. The sponsoring local government may also provide that revenue bonds payable out of the same source or sources of revenue may later be issued on a parity with any revenue bonds being issued and sold.
     (2) Revenue bonds issued pursuant to this section are not an indebtedness of the sponsoring local government issuing the bonds, and the interest and principal on the bonds shall only be payable from the revenues lawfully pledged to meet the principal and interest requirements and any reserves created pursuant to RCW 39.44.140. The owner or bearer of a revenue bond or any interest coupon issued pursuant to this section shall not have any claim against the sponsoring local government arising from the bond or coupon except for payment from the revenues lawfully pledged to meet the principal and interest requirements and any reserves created pursuant to RCW 39.44.140. The substance of the limitations included in this subsection shall be plainly printed, written, or engraved on each bond issued pursuant to this section.
     (3) Revenue bonds with a maturity in excess of twenty-five years shall not be issued. The legislative authority of the sponsoring local government shall by resolution determine for each revenue bond issue the amount, date, form, terms, conditions, denominations, maximum fixed or variable interest rate or rates, maturity or maturities, redemption rights, registration privileges, manner of execution, manner of sale, callable provisions, if any, and covenants including the refunding of existing revenue bonds. Facsimile signatures may be used on the bonds and any coupons. Refunding revenue bonds may be issued in the same manner as revenue bonds are issued.

NEW SECTION.  Sec. 601   JOINT LEGISLATIVE AUDIT AND REVIEW COMMITTEE REPORTS. Beginning September 1, 2013, and continuing every five years thereafter, the joint legislative audit and review committee shall submit a report to the appropriate committees of the legislature. The report shall, at a minimum, evaluate the effectiveness of the local infrastructure financing tool program, including a project by project review. The report shall include a comparison of the local infrastructure financing revenues received to the incremental improvements in assessed value of the real property located within the revenue development area. The report that is due September 1, 2028, should also include any recommendations regarding whether or not the program should be expanded statewide and what impact the expansion would have on economic development in Washington.

NEW SECTION.  Sec. 701   DEPARTMENT OF REVENUE EVALUATION. The department of revenue shall evaluate and periodically report on the implementation of the local infrastructure financing program to the governor and legislature as the department deems appropriate and recommend such amendments, changes in, and modifications of this act as seem proper.

NEW SECTION.  Sec. 702   CAPTIONS. Captions and part headings used in this act are not any part of the law.

NEW SECTION.  Sec. 703   SEVERABILITY. 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.

NEW SECTION.  Sec. 704   PORT DISTRICTS. Nothing in this act shall be construed to give port districts the authority to impose a sales or use tax under chapter 82.14 RCW.

NEW SECTION.  Sec. 705   EFFECTIVE DATE. This act takes effect July 1, 2006.

NEW SECTION.  Sec. 706   EXPIRATION DATE. This act expires June 30, 2039.

NEW SECTION.  Sec. 707   NEW CHAPTER. Sections 101 through 302 and 402 through 601 of this act constitute a new chapter in Title 39 RCW.