BILL REQ. #:  H-2242.1 

READ FIRST TIME 02/23/09.   

     AN ACT Relating to aquatic lands lease rates for marinas; amending RCW 79.105.060 and 79.105.240; and adding a new section to chapter 79.105 RCW.

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

Sec. 1   RCW 79.105.060 and 2005 c 155 s 102 are each amended to read as follows:
     The definitions in this section apply throughout chapters 79.105 through 79.145 RCW unless the context clearly requires otherwise.
     (1) "Aquatic lands" means all tidelands, shorelands, harbor areas, and the beds of navigable waters.
     (2) "Beds of navigable waters" means those lands lying waterward of and below the line of navigability on rivers and lakes not subject to tidal flow, or extreme low tide mark in navigable tidal waters, or the outer harbor line where harbor area has been created.
     (3) "First-class shorelands" means the shores of a navigable lake or river belonging to the state, not subject to tidal flow, lying between the line of ordinary high water and the line of navigability, or inner harbor line where established and within or in front of the corporate limits of any city or within two miles of either side.
     (4) "First-class tidelands" means the shores of navigable tidal waters belonging to the state, lying within or in front of the corporate limits of any city, or within one mile of either side and between the line of ordinary high tide and the inner harbor line; and within two miles of the corporate limits on either side and between the line of ordinary high tide and the line of extreme low tide.
     (5) "Harbor area" means the area of navigable waters determined as provided in Article XV, section 1 of the state Constitution, which shall be forever reserved for landings, wharves, streets, and other conveniences of navigation and commerce.
     (6) "Improvements" when referring to state-owned aquatic lands means anything considered a fixture in law placed within, upon, or attached to aquatic lands that has changed the value of those lands, or any changes in the previous condition of the fixtures that changes the value of the land.
     (7) "Inflation rate" means for a given year the percentage rate of change in the previous calendar year's all commodity producer price index of the bureau of labor statistics of the United States department of commerce. If the index ceases to be published, the department shall designate by rule a comparable substitute index.
     (8) "Inner harbor line" means a line located and established in navigable waters between the line of ordinary high tide or ordinary high water and the outer harbor line, constituting the inner boundary of the harbor area.
     (9) "Log booming" means placing logs into and taking them out of the water, assembling and disassembling log rafts before or after their movement in water-borne commerce, related handling and sorting activities taking place in the water, and the temporary holding of logs to be taken directly into a processing facility. "Log booming" does not include the temporary holding of logs to be taken directly into a vessel.
     (10) "Log storage" means the water storage of logs in rafts or otherwise prepared for shipment in water-borne commerce, but does not include the temporary holding of logs to be taken directly into a vessel or processing facility.
     (11) "Marina" means a private facility providing boat moorage space, fuel, or commercial services. Commercial services include, but are not limited to, overnight or live-aboard boating accommodations.
     (12) "Nonwater-dependent use" means a use that can operate in a location other than on the waterfront. Examples include, but are not limited to, hotels, condominiums, apartments, restaurants, retail stores, and warehouses not part of a marine terminal or transfer facility.
     (((12))) (13) "Outer harbor line" means a line located and established in navigable waters as provided in Article XV, section 1 of the state Constitution, beyond which the state shall never sell or lease any rights whatever to private persons.
     (((13))) (14) "Person" means any private individual, partnership, association, organization, cooperative, firm, corporation, the state or any agency or political subdivision thereof, any public or municipal corporation, or any unit of government, however designated.
     (((14))) (15) "Port district" means a port district created under Title 53 RCW.
     (((15))) (16) "Public utility lines" means pipes, conduits, and similar facilities for distribution of water, electricity, natural gas, telephone, other electronic communication, and sewers, including sewer outfall lines.
     (((16))) (17) "Real rate of return" means the average for the most recent ten calendar years of the average rate of return on conventional real property mortgages as reported by the federal home loan bank board or any successor agency, minus the average inflation rate for the most recent ten calendar years.
     (((17))) (18) "Second-class shorelands" means the shores of a navigable lake or river belonging to the state, not subject to tidal flow, lying between the line of ordinary high water and the line of navigability, and more than two miles from the corporate limits of any city.
     (((18))) (19) "Second-class tidelands" means the shores of navigable tidal waters belonging to the state, lying outside of and more than two miles from the corporate limits of any city, and between the line of ordinary high tide and the line of extreme low tide.
     (((19))) (20) "Shorelands," where not preceded by "first-class" or "second-class," means both first-class shorelands and second-class shorelands.
     (((20))) (21) "State-owned aquatic lands" means all tidelands, shorelands, harbor areas, the beds of navigable waters, and waterways owned by the state and administered by the department or managed under RCW 79.105.420 by a port district. "State-owned aquatic lands" does not include aquatic lands owned in fee by, or withdrawn for the use of, state agencies other than the department.
     (((21))) (22) "Terminal" means a point of interchange between land and water carriers, such as a pier, wharf, or group of such, equipped with facilities for care and handling of either cargo or passengers, or both.
     (((22))) (23) "Tidelands," where not preceded by "first-class" or "second-class," means both first-class tidelands and second-class tidelands.
     (((23))) (24) "Valuable materials" when referring to state-owned aquatic lands means any product or material within or upon lands, such as forest products, forage, stone, gravel, sand, peat, agricultural crops, and all other materials of value except mineral, coal, petroleum, and gas as provided for under chapter 79.14 RCW. However, RCW 79.140.190 and 79.140.200 also apply to materials provided for under chapter 79.14 RCW.
     (((24))) (25) "Water-dependent use" means a use that cannot logically exist in any location but on the water. Examples include, but are not limited to: Water-borne commerce; terminal and transfer facilities; ferry terminals; watercraft sales in conjunction with other water-dependent uses; watercraft construction, repair, and maintenance; moorage and launching facilities; aquaculture; log booming; and public fishing piers and parks.
     (((25))) (26) "Water-oriented use" means a use that historically has been dependent on a waterfront location, but with existing technology could be located away from the waterfront. Examples include, but are not limited to, wood products manufacturing, watercraft sales, fish processing, petroleum refining, sand and gravel processing, log storage, and house boats. For the purposes of determining rent under this chapter, water-oriented uses shall be classified as water-dependent uses if the activity either is conducted on state-owned aquatic lands leased on October 1, 1984, or was actually conducted on the state-owned aquatic lands for at least three years before October 1, 1984. If, after October 1, 1984, the activity is changed to a use other than a water-dependent use, the activity shall be classified as a nonwater-dependent use. If continuation of the existing use requires leasing additional state-owned aquatic lands and is permitted under the shoreline management act of 1971, chapter 90.58 RCW, the department may allow reasonable expansion of the water-oriented use.

Sec. 2   RCW 79.105.240 and 2005 c 155 s 147 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, except for marinas, 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 (a) of this subsection.
     (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 79.105.270 in those cases in which the state owns the fill and has a right to charge for the fill.
     (((7) 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. 3   A new section is added to chapter 79.105 RCW under the subchapter heading "leasing and rental rates" to read as follows:
     (1) For leases for marina uses only, as of July 1, 2010, lease rates are a percentage of the annual gross revenues generated by the lessee marina. It is the intent of the legislature that additional legislation be enacted prior to July 1, 2010, 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 section.
     (2) By December 31, 2009, the department must develop a recommended formula for calculating marina rents consistent with this section and report the recommendation to the appropriate committees of 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, 2009.
     (3) In addition to the percent of marina income, the department shall determine its direct administrative costs and shall recover these costs from lessees. Administrative costs may include the 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. All administrative costs recovered by the department must be deposited into the resource management cost account created in RCW 79.64.020.
     (4) 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 include any minority reports by the participating parties in its report to the legislature.
     (5) When developing its recommendation for a marina lease formula consistent with this section, 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.
     (6) 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 31, 2009, and again annually on a date set by the department. 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.
     (7) Initially, the marina rent formula developed by the department under subsection (2) of this section must be applied to each marina on its anniversary date, beginning July 1, 2010, and must be based on that marina's 2009 income information. Thereafter, rents will be recalculated each year, based on the marina's gross revenue from the previous year.
     (8) No marina lease may be for less than five hundred dollars, plus direct administrative costs.
     (9) If by July 1, 2010, the legislature fails to adopt additional legislation amending this section, the department shall initiate rule making that establishes the recommended rent formula developed under subsection (2) of this section by rule.