BILL REQ. #:  H-3026.2 

Read first time 02/15/12.   Referred to Committee on Ways & Means.

     AN ACT Relating to the local infrastructure financing tool program; amending RCW 39.102.020, 39.102.030, 39.102.040, 39.102.070, and 39.102.904; and reenacting and amending RCW 39.102.140.

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

Sec. 1   RCW 39.102.020 and 2010 c 164 s 11 are each amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Annual state contribution limit" means ((seven)) twelve million five hundred thousand dollars statewide per fiscal year.
     (2) "Assessed value" means the valuation of taxable real property as placed on the last completed assessment roll.
     (3) "Board" means the community economic revitalization board under chapter 43.160 RCW.
     (4) "Demonstration project" means one of the following projects:
     (a) Bellingham waterfront redevelopment project;
     (b) Spokane river district project at Liberty Lake; and
     (c) Vancouver riverwest project.
     (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 tax allocation revenue" means an amount of local excise taxes equal to some or all of the sponsoring local government's local excise tax increment, amounts of local excise taxes equal to some or all of any participating local government's excise tax increment as agreed upon in the written agreement under RCW 39.102.080(1), or both, and dedicated to local infrastructure financing.
     (8) "Local excise tax increment" means an amount equal to the estimated annual increase in local excise taxes in each calendar year following the approval of the revenue development area by the board from taxable activity within the revenue development area, as set forth in the application provided to the board under RCW 39.102.040, and updated in accordance with RCW 39.102.140(1)(f).
     (9) "Local excise taxes" means local revenues derived from the imposition of sales and use taxes authorized in RCW 82.14.030.
     (10) "Local government" means any city, town, county, port district, and any federally recognized Indian tribe.
     (11) "Local infrastructure financing" means the use of revenues received from local excise tax allocation revenues, local property tax allocation revenues, other revenues from local public sources, and revenues received from the local option sales and use tax authorized in RCW 82.14.475, dedicated to pay either the principal and interest on bonds authorized under RCW 39.102.150 or to pay public improvement costs on a pay-as-you-go basis subject to RCW 39.102.195, or both.
     (12) "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.
     (13) "Low-income housing" means residential housing for low-income persons or families who lack the means which is necessary to enable them, without financial assistance, to live in decent, safe, and sanitary dwellings, without overcrowding. For the purposes of this subsection, "low income" means income that does not exceed eighty percent of the median family income for the standard metropolitan statistical area in which the revenue development area is located.
     (14) "Ordinance" means any appropriate method of taking legislative action by a local government.
     (15) "Participating local government" means a local government having a revenue development area within its geographic boundaries that has entered into a written agreement with a sponsoring local government as provided in RCW 39.102.080 to allow the use of all or some of its local excise tax allocation revenues or other revenues from local public sources dedicated for local infrastructure financing.
     (16) "Participating taxing district" means a local government having a revenue development area within its geographic boundaries that has entered into a written agreement with a sponsoring local government as provided in RCW 39.102.080 to allow the use of some or all of its local property tax allocation revenues or other revenues from local public sources dedicated for local infrastructure financing.
     (17) "Property tax allocation revenue base value" means the assessed value of real property located within a revenue development area less the property tax allocation revenue value.
     (18)(a)(i) "Property tax allocation revenue value" means seventy-five percent of any increase in the assessed value of real property in a revenue development area resulting from:
     (A) The placement of new construction, improvements to property, or both, on the assessment roll, where the new construction and improvements are initiated after the revenue development area is approved by the board;
     (B) The cost of new housing construction, conversion, and rehabilitation improvements, when such cost is treated as new construction for purposes of chapter 84.55 RCW as provided in RCW 84.14.020, and the new housing construction, conversion, and rehabilitation improvements are initiated after the revenue development area is approved by the board;
     (C) The cost of rehabilitation of historic property, when such cost is treated as new construction for purposes of chapter 84.55 RCW as provided in RCW 84.26.070, and the rehabilitation is initiated after the revenue development area is approved by the board.
     (ii) Increases in the assessed value of real property in a revenue development area resulting from (a)(i)(A) through (C) of this subsection are included in the property tax allocation revenue value in the initial year. These same amounts are also included in the property tax allocation revenue value in subsequent years unless the property becomes exempt from property taxation.
     (b) "Property tax allocation revenue value" includes seventy-five percent of any increase in the assessed value of new construction consisting of an entire building in the years following the initial year, unless the building becomes exempt from property taxation.
     (c) Except as provided in (b) of this subsection, "property tax allocation revenue value" does not include any increase in the assessed value of real property after the initial year.
     (d) There is no property tax allocation revenue value if the assessed value of real property in a revenue development area has not increased as a result of any of the reasons specified in (a)(i)(A) through (C) of this subsection.
     (e) For purposes of this subsection, "initial year" means:
     (i) For new construction and improvements to property added to the assessment roll, the year during which the new construction and improvements are initially placed on the assessment roll;
     (ii) For the cost of new housing construction, conversion, and rehabilitation improvements, when such cost is treated as new construction for purposes of chapter 84.55 RCW, the year when such cost is treated as new construction for purposes of levying taxes for collection in the following year; and
     (iii) For the cost of rehabilitation of historic property, when such cost is treated as new construction for purposes of chapter 84.55 RCW, the year when such cost is treated as new construction for purposes of levying taxes for collection in the following year.
     (19) "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; (f) administrative expenses and feasibility studies reasonably necessary and related to these costs; and (g) any of the above-described 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.
     (20) "Public improvements" means:
     (a) Infrastructure improvements within the revenue development area that include:
     (i) Street, bridge, and road construction and maintenance, including highway interchange construction;
     (ii) Water and sewer system construction and improvements, including wastewater reuse facilities;
     (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, including trails; ((and))
     (vii) Storm water and drainage management systems; and
     (viii) Passenger facilities, structures, stops, shelters, bus zones, properties, and rights-of-way of all kinds that are owned, leased, held, or used by a transit authority for the purpose of providing public transportation services;
     (b) Expenditures for facilities and improvements that support affordable housing as defined in RCW 43.63A.510.
     (21) "Real property" has the same meaning as in RCW 84.04.090 and also includes any privately owned improvements located on publicly owned land that are subject to property taxation.
     (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) "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.
     (24) "Revenue development area" means the geographic area adopted by a sponsoring local government and approved by the board, from which local excise and property tax allocation revenues are derived for local infrastructure financing.
     (25)(a) "Revenues from local public sources" means:
     (i) Amounts of local excise tax allocation revenues and local property tax allocation revenues, dedicated by sponsoring local governments, participating local governments, and participating taxing districts, for local infrastructure financing; and
     (ii) Any other local revenues, except as provided in (b) of this subsection, including revenues derived from federal and private sources.
     (b) Revenues from local public sources do not include any local funds derived from state grants, state loans, or any other state moneys including any local sales and use taxes credited against the state sales and use taxes imposed under chapter 82.08 or 82.12 RCW.
     (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 adopts a revenue development area and applies to the board to use local infrastructure financing.
     (28) "State contribution" means the lesser of:
     (a) One million dollars;
     (b) The total amount of local excise tax allocation revenues, local property tax allocation revenues, and other revenues from local public sources, that are dedicated by a sponsoring local government, any participating local governments, and participating taxing districts, in the preceding calendar year to the payment of principal and interest on bonds issued under RCW 39.102.150 or to pay public improvement costs on a pay-as-you-go basis subject to RCW 39.102.195, or both;
     (c) The amount of project award granted by the board in the notice of approval to use local infrastructure financing under RCW 39.102.040; or
     (d) The highest amount of state excise tax allocation revenues and state property tax allocation revenues for any one calendar year as determined by the sponsoring local government and reported to the board and the department as required by RCW 39.102.140.
     (29) "State excise tax allocation revenue" means an amount equal to the annual increase in state excise taxes estimated to be received by the state in each calendar year following the approval of the revenue development area by the board, from taxable activity within the revenue development area as set forth in the application provided to the board under RCW 39.102.040 and periodically updated and reported as required in RCW 39.102.140(1)(f).
     (30) "State excise taxes" means revenues derived from state retail sales and use taxes under RCW 82.08.020(1) and 82.12.020 at the rate provided in RCW 82.08.020(1), less the amount of tax distributions from all local retail sales and use taxes, other than the local sales and use taxes authorized by RCW 82.14.475 for the applicable revenue development area, imposed on the same taxable events that are credited against the state retail sales and use taxes under chapters 82.08 and 82.12 RCW.
     (31) "State property tax allocation revenue" means an amount equal to the estimated 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, as set forth in the application submitted to the board under RCW 39.102.040 and updated annually in the report required under RCW 39.102.140(1)(f).
     (32) "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.

Sec. 2   RCW 39.102.030 and 2006 c 181 s 201 are each amended to read as follows:
     The local infrastructure financing tool program is created to assist local governments in financing authorized public infrastructure projects designed to promote economic development and increase jobs 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.

Sec. 3   RCW 39.102.040 and 2007 c 229 s 2 are each amended to read as follows:
     (1) Prior to applying to the board to use local infrastructure financing, a sponsoring local government ((shall)) must:
     (a) Designate a revenue development area within the limitations in RCW 39.102.060;
     (b) Certify that the conditions in RCW 39.102.070 are met;
     (c) Complete the process in RCW 39.102.080;
     (d) Provide public notice as required in RCW 39.102.100; and
     (e) Pass an ordinance adopting the revenue development area as required in RCW 39.102.090.
     (2) Any local government that has created an increment area under chapter 39.89 RCW and has not issued bonds to finance any public improvement may apply to the board and have its increment area considered for approval as a revenue development area under this chapter without adopting a new revenue development area under RCW 39.102.090 and 39.102.100 if it amends its ordinance to comply with RCW 39.102.090(1) and otherwise meets the conditions and limitations under this chapter.
     (3) As a condition to imposing a sales and use tax under RCW 82.14.475, a sponsoring local government, including any cosponsoring local government seeking authority to impose a sales and use tax under RCW 82.14.475, must apply to the board and be approved for a project award amount. The application ((shall)) must be in a form and manner prescribed by the board and include but not be limited to information establishing that the applicant is an eligible candidate to impose the local sales and use tax under RCW 82.14.475, 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)) must make available forms to be used for this purpose. As part of the application, each applicant must provide to the board a copy of the ordinance or ordinances creating the revenue development area as required in RCW 39.102.090. A notice of approval to use local infrastructure financing ((shall)) must contain a project award that represents the maximum amount of state contribution that the applicant, including any cosponsoring local governments, can earn each year that local infrastructure financing is used. The total of all project awards ((shall)) may not exceed the annual state contribution limit. The determination of a project award ((shall)) must be made based on information contained in the application and the remaining amount of annual state contribution limit to be awarded. Determination of a project award by the board is final.
     (4)(a) Sponsoring local governments, and any cosponsoring local governments, applying in calendar year 2007 for a competitive project award, must submit completed applications to the board no later than July 1, 2007. By September 15, 2007, in consultation with the department of revenue and the department of ((community, trade, and economic development)) commerce, the board ((shall)) must approve competitive project awards from competitive applications submitted by the 2007 deadline. No more than two million five hundred thousand dollars in competitive project awards shall be approved in 2007. For projects not approved by the board in 2007, sponsoring and cosponsoring local governments may apply again to the board in 2008 for approval of a project.
     (b) Sponsoring local governments, and any cosponsoring local governments, applying in calendar year 2008 for a competitive project award, must submit completed applications to the board no later than July 1, 2008. By September 18, 2008, in consultation with the department of revenue and the department of ((community, trade, and economic development)) commerce, the board ((shall)) must approve competitive project awards from competitive applications submitted by the 2008 deadline.
     (c) Sponsoring local governments, and any cosponsoring local governments, applying in calendar year 2012 for a competitive project award, must submit completed applications to the board no later than July 1, 2012. By September 15, 2012, in consultation with the department of revenue and the department of commerce, the board must approve competitive project awards from competitive applications submitted by the 2012 deadline. The board, in consultation with the Washington state economic development commission must assign relative weights to the selection criteria and include it in the application process. No more than five million dollars in competitive project awards may be approved in 2012.
     (5) Except as provided in RCW 39.102.050(2), a total of no more than ((five)) ten million dollars in competitive project awards ((shall)) may be approved for local infrastructure financing.
     (((d))) (6) The project selection criteria and weighting developed prior to July 22, 2007, for the application evaluation and approval process shall apply to applications received prior to November 1, 2007. In evaluating applications for a competitive project award after November 1, 2007, the board ((shall)) must, in consultation with the Washington state economic development commission, develop the relative weight to be assigned to the following criteria:
     (((i))) (a) The project's potential to enhance the sponsoring local government's regional and/or international competitiveness;
     (((ii))) (b) The project's ability to encourage mixed use and transit-oriented development and the redevelopment of a geographic area;
     (((iii))) (c) Achieving an overall distribution of projects statewide that reflect geographic diversity;
     (((iv))) (d) The estimated wages and benefits for the project is greater than the average labor market area;
     (((v))) (e) The estimated state and local net employment change over the life of the project;
     (((vi))) (f) The current economic health and vitality of the proposed revenue development area and the contiguous community and the estimated impact of the proposed project on the proposed revenue development area and contiguous community;
     (((vii))) (g) The estimated state and local net property tax change over the life of the project;
     (((viii))) (h) The estimated state and local sales and use tax increase over the life of the project;
     (((ix))) (i) An analysis that shows that, over the life of the project, neither the local excise tax allocation revenues nor the local property tax allocation revenues will constitute more than eighty percent of the total local funds as described in RCW 39.102.020(((29)(c))); ((and
     (x))) (j) If a project is located within an urban growth area, evidence that the project utilizes existing urban infrastructure and that the transportation needs of the project will be adequately met through the use of local infrastructure financing or other sources; and
     (k) In evaluating applications for a competitive project award after June 30, 2012, the following project selection criteria must also be used:
     (i) The project's potential to enhance the sponsoring local government's competitiveness in manufacturing, technology, or other industry sector or cluster targeted by the department of commerce under RCW 43.330.090;
     (ii) The estimated wages and benefits for the project created in the middle-income bracket or higher as defined in RCW 28B.145.060 projected annually and over the life of the project;
     (iii) The estimated state and local net employment change for positions with wages and benefits in the middle-income bracket or higher projected annually and over the life of the project;
     (iv) The project's potential to assist a local government in implementing its comprehensive plan, capital facilities plan, or planning goals adopted under the growth management act; and
     (v) The project's potential to redevelop a brownfield that is certified by the department of ecology as requiring no further remediation.
     (((e)(i))) (7)(a) Except as provided in this subsection (((4)(e))), the board may not approve the use of local infrastructure financing within more than one revenue development area per county.
     (((ii))) (b) In a county in which the board has approved the use of local infrastructure financing, the use of such financing in additional revenue development areas may be approved, subject to the following conditions:
     (((A))) (i) The sponsoring local government is located in more than one county; and
     (((B))) (ii) The sponsoring local government designates a revenue development area that comprises portions of a county within which the use of local infrastructure financing has not yet been approved.
     (((iii))) (c) In a county where the local infrastructure financing tool is authorized under RCW 39.102.050, the board may approve additional use of the local infrastructure financing tool.
     (((5))) (8) Once the board has approved the sponsoring local government, and any cosponsoring local governments, to use local infrastructure financing, notification must be sent by the board to the sponsoring local government, and any cosponsoring local governments, authorizing the sponsoring local government, and any cosponsoring local governments, to impose the local sales and use tax authorized under RCW 82.14.475, subject to the conditions in RCW 82.14.475.

Sec. 4   RCW 39.102.070 and 2009 c 267 s 2 are each amended to read as follows:
     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 or 82.14.390;
     (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, participating local government, or participating taxing district 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. For projects awarded under RCW 39.102.040(4)(c), the revenue development area must include, but not be limited to, land uses designated for commercial, industrial, or manufacturing uses under the comprehensive plan and development regulations;
     (6) The governing body of the sponsoring local government, and any cosponsoring 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, and any cosponsoring 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 any 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 RCW 82.14.475, 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.

Sec. 5   RCW 39.102.140 and 2009 c 518 s 12 and 2009 c 267 s 5 are each reenacted and amended to read as follows:
     (1) A sponsoring local government ((shall)) must provide a report to the board and the department by March 1st of each year. The report ((shall)) must contain the following information:
     (a) The amount of local excise tax allocation revenues, local property tax allocation revenues, other revenues from local public sources, and taxes under RCW 82.14.475 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;
     (e) That the sponsoring local government is in compliance with RCW 39.102.070; ((and))
     (f) Beginning with the reports due March 1, 2010, the following must also be included:
     (i) A list of public improvements financed on a pay-as-you-go basis in previous calendar years and by indebtedness issued under this chapter;
     (ii) The date when any indebtedness issued under this chapter is expected to be retired;
     (iii) At least once every three years, updated estimates of state excise tax allocation revenues, state property tax allocation revenues, and local excise tax increments, as determined by the sponsoring local government, that are estimated to have been received by the state, any participating local government, sponsoring local government, and cosponsoring local government, since the approval of the project award under RCW 39.102.040 by the board; and
     (iv) Any other information required by the department or the board to enable the department or the board to fulfill its duties under this chapter and RCW 82.14.475; and
     (g) Reports on projects funded under RCW 39.102.040(5) must also include:
     (i) A comparison between the total number of permanent jobs with wages and benefits in the middle-income bracket or higher 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, and the number proposed in the application process; and
     (ii) A comparison between 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 the estimated wages and benefits for the project created in the middle-income bracket or higher projected in the application process.
     (2) The board ((shall)) must make a report available to the public and the legislature by June 1st of each even-numbered year. The report ((shall)) must 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)) must also include a summary of the information provided to the department by sponsoring local governments under subsection (1) of this section.
     (3) The department, upon request, must assist a sponsoring local government in estimating the amount of state excise tax allocation revenues and local excise tax increments required in subsection (1)(f)(iii) of this section.

Sec. 6   RCW 39.102.904 and 2006 c 181 s 707 are each amended to read as follows:
     This act expires June 30, ((2039)) 2045.