HOUSE BILL REPORT

HB 1744

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Summary of Substitute Bill

Allows, until June 30, 2012, proceeds from a locally-imposed real estate excise tax (REET) to be used for park maintenance and operation expenditures.
Prohibits, with some exceptions, jurisdictions that are using proceeds from a locally-imposed REET for park and maintenance operation expenditures from using REET proceeds for the acquisition of capital projects.
Modifies, subject to expiration provisions, the list of capital projects for which certain REET proceeds may be used.

Background:

County legislative authorities may impose an excise tax on each sale of real property in unincorporated areas of the county. Similarly, city and town legislative authorities also may impose an excise tax on each sale of real property within their corporate limits. The rate of these real estate excise taxes (REETs) may not exceed 0.25 percent of the selling price. Revenues generated from this tax must be used for financing qualifying capital projects, as that term is defined in statute, and for housing relocation assistance.

Counties, cities, and towns that fully plan under the Growth Management Act (GMA) may impose an additional REET on each sale of real property that may not exceed 0.25 percent of the selling price. Counties that opted to fully plan under the GMA, and the cities and towns within, may impose the additional REET with voter approval.

With some exceptions, revenues generated from this additional REET may only be used for financing capital projects specified in the capital facilities element of a comprehensive plan adopted under the GMA. "Capital project," for purposes of the additional REET, means public works projects of a local government for planning, acquisition, construction, reconstruction, repair, replacement, rehabilitation, or improvement of specific infrastructure, including:

streets;
domestic water systems;
recreational facilities; and
planning, construction, reconstruction, repair, rehabilitation, or improvement of parks.

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Summary of Substitute Bill:

Revenues generated from the additional REET that may be imposed by counties, cities, and towns that fully plan under the GMA may, until June 30, 2012, be used for park maintenance and operation expenditures. Revenues from this tax may not be used to supplant existing sources of funding for park maintenance and operation expenditures. Counties, cities, and towns using REET proceeds for park maintenance and operation expenditures may not use these proceeds for the acquisition of capital projects specified in a capital facilities plan element of a comprehensive plan. This limitation does not apply to capital projects that are necessary for the health and safety of residents within the county, city, or town imposing the tax.

The definition of "capital project," for purposes of the additional REET, is modified to allow proceeds from the tax, until June 30, 2012, to be used for additional purposes, including:

parks;
recreational facilities;
law enforcement facilities;

trails; and
administrative and/or judicial facilities.

Until June 30, 2012, "capital projects" do not include local government expenditures for the planning, construction, reconstruction, repair, rehabilitation, or improvement of parks. "Capital projects" after June 30, 2012, include expenditures for the planning, construction, reconstruction, repair, rehabilitation, or improvement of parks.

Substitute Bill Compared to Original Bill:

The substitute bill specifies that revenues generated from the applicable REET may be used for park maintenance and operation expenditures until June 30, 2012. Counties, cities, and towns using REET revenues for park maintenance and operation expenditures may not use these revenues for the acquisition of capital projects specified in a capital facilities plan element of a comprehensive plan. The substitute includes allowances for spending REET revenues on capital projects that are necessary for the health and safety of residents within the county, city, or town imposing the tax. Projects that do and do not qualify as "capital projects" after June 30, 2012, are delineated in the substitute bill.

Staff Summary of Public Testimony:

(In support) This bill allows REET proceeds to be used for the maintenance and operation of parks. It gives cities and counties financial flexibility to maintain things that are already constructed, but it does not include a tax increase. A similar bill was previously passed by the House of Representatives.

This bill is a request for greater flexibility with existing funds and will allow communities to make choices about using REET proceeds. Local governments need to be more creative in their use of existing revenue sources. The budget process proposed by this bill is transparent. Parks are central to a community: resources for parks are being depleted, but this bill will help. Proceeds from the additional REET will continue to be used for capital needs. Citizens, during these economic times, may not be willing to authorize additional taxes. This bill will stabilize park services. Many rural communities are revenue challenged and citizens are unhappy with current park maintenance levels. This bill will result in safer, cleaner environments for children and recreation.

(Opposed) This bill is the wrong approach to funding infrastructure. Proceeds from the REET are volatile, limited, and already fall short of existing needs. There are other and more appropriate sources for funding infrastructure. This bill masks the costs of government by siphoning revenues for capital projects to maintenance and operation expenditures. The Legislature needs to maintain fiscal responsibility and limit the use of REET proceeds to funding infrastructure.