HOUSE BILL REPORT

HB 1223

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.

As Reported by House Committee On:

Community Development, Housing & Tribal Affairs

Title: An act relating to allowing the use of lodging taxes for financing workforce housing.

Brief Description: Allowing the use of lodging taxes for financing workforce housing.

Sponsors: Representatives Springer, Kochmar, Sullivan, Rodne, Pettigrew, Wilcox, Fitzgibbon, McBride, Tarleton, Stokesbary, Sells, Lytton, Bergquist, Ormsby, Pollet, Fey, Santos and Walkinshaw.

Brief History:

Committee Activity:

Community Development, Housing & Tribal Affairs: 1/26/15, 2/9/15 [DPS].

Brief Summary of Substitute Bill

  • Provides that hotel-motel tax revenues can be used to pay off bonds issued for affordable workforce housing.

  • Allows certain hotel-motel tax revenues dedicated for affordable workforce housing to pay off revenue bonds issued for projects by a community preservation and development authority.

HOUSE COMMITTEE ON COMMUNITY DEVELOPMENT, HOUSING & TRIBAL AFFAIRS

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 5 members: Representatives Appleton, Chair; Robinson, Vice Chair; Johnson, Ranking Minority Member; Zeiger, Assistant Ranking Minority Member; Sawyer.

Minority Report: Do not pass. Signed by 2 members: Representatives Hawkins and Van De Wege.

Staff: Sean Flynn (786-7124).

Background:

Hotel-Motel Tax.

The state imposes an excise tax on the sale of goods and services provided in the state, including the furnishing of lodging by a hotel, motel, rooming house, private campground, trailer park, and similar short-term accommodation. Cities and counties are authorized to impose an additional special local excise tax on lodging services, known as a local hotel-motel tax.

One type of local hotel-motel tax allows cities and counties to levy up to 2 percent of a lodging charge, which is credited against the state tax rate of 6.5 percent. Counties imposing this "state shared hotel-motel tax" also must provide a credit for a similar tax imposed by any city within the county. Counties and cities also have authority to levy an additional special hotel-motel tax that may be added onto the state tax rate.

Revenue generated from these local hotel-motel taxes generally are used for tourism promotion or the acquisition and operation of tourism-related facilities. A county may issue general obligation and revenue bonds that are payable from the special hotel-motel tax revenues.

There are certain local exceptions on the application and use of the 2 percent state shared hotel-motel tax in certain cities. Cities in King County, except the City of Bellevue, are prohibited from imposing this tax. Currently, all revenues from the state shared hotel-motel tax in King County must be used in the following manner:

Workforce Housing and Homeless Services.

For purposes of the state shared hotel-motel tax revenues, affordable workforce housing means housing for households whose income is between 30 and 80 percent of the median income in the county where the housing is located. According to the 2014 federal guidelines, the 30 to 80 percent range of the median income in King County is as follows: $18,550-$45,750 for a single person; and $26,450-$63,900 for a family of four.

The King County Housing and Community Development Program (Program) provides financing for housing projects through local housing authorities and nonprofit organizations. The Program also provides services for homeless persons, including homeless youth and young adults.

Community Preservation and Development Authority.

The Legislature may authorize the creation of a Community Preservation and Development Authority (CPDA) that is proposed by residents, property owners, employers, and business owners of a community adversely impacted by the construction and operation of publicly funded facilities. The community proposal must identify a stable source of revenue that has a nexus with multiple publically funded facilities that have adversely impacted the community and that can be used to fund operating and capital projects.

The board of directors for a CPDA must include business representatives, residents, nonprofit and social service providers, persons with knowledge of the community, as well as local legislative representatives who serve as ex-officio members. Board elections are held during annual local town hall meetings.

Among its powers, a CPDA has the authority to fundraise, employ, enter into real estate contracts, invest, and incur debt. The CPDA may accept public funding, however, it may not use funds to support a political candidate or party.

The CPDA must establish its geographic boundaries and develop a strategic plan to restore and promote the health, safety, and economic welfare and cultural and historic identity of the impacted community. The CPDA may establish funding mechanisms to support capital and operating projects, including private and public funding, that address the negative impacts of multiple publicly funded projects on the community. The CPDA also must report to the Legislature and at its annual town hall meeting on implementation of its strategic plan. State and local government agencies must consult with the CPDA regarding the siting and construction of future major public facilities.

The first-and-only CPDA was authorized in 2007 in the Seattle Pioneer Square and International District communities. The CPDA is currently called "Historic South Downtown."

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Summary of Substitute Bill:

Counties and cities may issue general obligation or revenue bonds for affordable workforce housing within 0.5 miles of a transit station that are paid with hotel-motel tax revenues. Beginning in 2021, at least 37.5 percent of revenues from the state shared hotel-motel tax revenue for King County must be used:

The debt service on revenue bonds issued by a county or city for purposes of funding affordable workforce housing is limited to no more than 50 percent of the hotel-motel tax revenue on projects reasonably expected to spend funds within three years. Ten percent of the proceeds from all revenue bonds issued for affordable workforce housing must be used to finance projects authorized by a CPDA to promote sustainable workplace opportunities near a community impacted by the construction of tourism-related facilities.

Substitute Bill Compared to Original Bill:

The substitute bill makes corrections to specify the funding source for revenue bonds used to finance affordable workforce housing.

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Appropriation: None.

Fiscal Note: Not requested.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) The real estate expansion in King County is a good thing, but there is a cost to affordable housing for all the new construction and development. Speculative development and large scale construction threatens the goals of mixed income development and small businesses. The county needs the ability to raise bond revenues a little earlier to take advantage of opportunity costs and find land to develop for affordable housing that likely will be unaffordable to purchase in five years. This is not raising any new taxes, just speeding up the process. This bill provided for local decisions about a local resource and does not force the county to do anything.

The bonding authority in this bill will allow the county to double the amount it can invest in workforce housing now, before prices rise. This allows the county to build at today's cost, which will save the county $67 million, rather than having to wait to purchase property after real estate prices have risen.

Bonding capacity will be $45 million over two issuance periods. The funding amount for Historic South Downtown will be about $4.5 million. Downtown communities continue to be impacted by public projects. The tunnel and waterfront developments have negative impacts, even if there is long-term benefit. This bill provides a dedicated resource for Historic South Downtown and will allow necessary planning to address these issues facing both the International and Pioneer Square communities.

Affordable housing close to transit centers helps communities grow and relieves stress on commuting traffic. Transit nexus helps relieve congestion. It is critical to use funds now, while transit centers are being chosen, so housing can be developed alongside new transit centers. This nexus allows people to save money in transit costs. Someone making $18 dollars an hour can barely afford the average rent in Seattle.

(Opposed) None.

Persons Testifying: Representative Springer, prime sponsor; Jim Kelley, Historic South Downtown; Bryce Yadon, Futurewise; Michael Shaw, King County; Sarah Lewontin, Bellwether Housing; and Paul Purcell, Beacon Development Group.

Persons Signed In To Testify But Not Testifying: None.