FINAL BILL REPORT

E2SSB 6609

C 164 L 10

Synopsis as Enacted

Brief Description: Concerning infrastructure financing for local governments.

Sponsors: Senate Committee on Ways & Means (originally sponsored by Senators Kastama, Delvin, Hobbs, Kilmer, Gordon, Kauffman and Shin).

Senate Committee on Economic Development, Trade & Innovation

Senate Committee on Ways & Means

Background: Tax increment financing is used to fund infrastructure projects. It is a method of redistributing increased tax revenues within a geographic area resulting from a public investment to pay for the bonds required to construct a project. During the past decade a number of tax increment financing programs have been created in the state: in 2001 the Legislature created the Community Revitalization Financing (CRF) program; in 2006 the Legislature created the Local Infrastructure Financing Tool (LIFT) program; and in 2009 the Legislature created the Local Revitalization Financing (LRF) program.

Under LRF, cities, counties, and port districts may create revitalization areas and may use certain tax revenues which increase within the area to finance local public improvements. Bonds may be issued to finance improvements and may be paid off using increased local sales/use tax revenues and property tax revenues generated from within the revitalization area; additional funds from other local public sources; and a state contribution. Funds from local public sources may pay for public improvement costs on a pay-as-you-go basis.

To use local revitalization financing, local governments must take several actions, including passing local ordinances, conducting public hearings, entering into a contract with a private developer, and applying to the Department of Revenue (department) for approval for the state contribution. The department is responsible for the administration of the program and must retain all applications that are not approved due to lack of available state contribution by order of the date received. If additional state contribution funding becomes available, sponsoring local governments will be able to withdraw or update the retained applications.

Local governments proposing a local revitalization area must provide notice to all taxing districts and local governments within the proposed area and hold public hearings. If taxing districts do not want to participate in the allocation of their property or certain local sales and use tax allocation revenues, they must take action through the adoption of an ordinance/resolution to opt out.

Six competitive projects and seven demonstration projects were begun in 2009. The maximum state contribution for the seven demonstration projects is $2.25 million per fiscal year and the maximum state contribution for all other revitalization areas is $2.5 million per fiscal year. The maximum state contribution per project is $500,000 per fiscal year. The state contribution awarded to a sponsoring local government is limited each year to the amount of local matching funds dedicated by the sponsoring local government in the preceding calendar year for revitalization financing. The state contribution must be used to pay for general obligation bonds issued to finance the public improvements in the revitalization area.

Sponsoring local governments that have been approved for a state contribution must provide annual accountability reports to the department. The department will report summary information to the public and the Legislature annually.

Summary: A definition of bonds is added and other definitions are changed to recognize interlocal agreements. Local ordinance requirements relating to notice and participating taxing districts are changed.

Interlocal agreements may allow a taxing district to contribute less than all of its regular property levies or participate by providing a specified amount for a specified time for local revitalization financing.

Revenue bonds may be issued if a special fund is created.

The state contribution limit for demonstration projects is increased to $4.2 million and demonstration projects are to be approved in 2010 for Richland, Lacey, Mill Creek, Puyallup, Renton, and New Castle. If a demonstration project does not meet statutory requirements, the associated dollars are not made available for other projects.

Annual reports from sponsoring local governments must include particular information about revenues from public sources for payment of bonds.

Jurisdictions with LIFT projects may receive a state contribution less than the project award until revenues reach the amount of the project award. The local sales and use tax may also be imposed before revenues reach the amount of the project award.

A LRF area may overlap with an existing CRF area with a brownfield clean-up site which meets certain requirements.

The resubmitted applications of the demonstration projects may not be approved unless an economic analysis has been performed by a qualified researcher at the University of Washington's Department of Economics. The researcher must confirm that there is an 85 percent probability the applications' assumptions, estimates of jobs created, and increased tax receipts will be realized by the project. Additionally, the researcher must determine that net state tax revenue will increase, as a result of the project, by an amount that equals or exceeds the authorized award.

Votes on Final Passage: