AN ACT Relating to the classification and valuation of multiple-unit buildings devoted primarily to low-income housing at current use value; adding a new chapter to Title 84 RCW; and providing a contingent effective date.

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

NEW SECTION. Sec. 1. The legislature hereby declares that:

(1) There is a shortage in the supply of decent, safe, and sanitary housing for persons of low income in this state. Far too many people live in overcrowded dwellings, in buildings that are not safe, sanitary, and protected from the elements, in temporary shelters, or even without any form of decent shelter.

(2) The shortage of safe, sanitary, decent housing for persons of low income harms the general health and safety. It deprives many persons of low income of proper shelter and protections from unreasonable risks of fire, crime, personal injury, and from overcrowded and deteriorated living conditions. It harms the general public by contributing to the use of storefronts, public parks, and sidewalks as shelter by the homeless and by contributing to slums and blight in urban areas.

(3) Public agencies acting alone do not have sufficient resources to supply housing for persons of low income. Federal cutbacks have made it even more difficult for public agencies to respond to the dwindling supply of low-income housing. The assistance of private capital and free enterprise is essential to reduce the shortage of housing for persons of low income, and organizations and individuals should be encouraged to preserve and develop low-income housing.

(4) Valuing and taxing property primarily devoted to low-income housing at its current use will provide an economic incentive for preservation and development of low-income housing and a disincentive to elimination of such housing for purely economic reasons. Such an incentive may delay the deterioration and demolition of existing low-income housing in higher density areas where competition from higher uses threatens this less competitive use, and it may encourage the development of additional low-income housing.

(5) This chapter will implement an amendment to Article VII, section 11, of the Washington state Constitution submitted to the electorate of the state of Washington at the November 1990 general election.

NEW SECTION. Sec. 2. The definitions set forth in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Devoted primarily to low-income housing" means that at least fifty percent of the rentable floor area of the building is occupied for residential purposes by persons of low income at rents set below market rates for comparable residences.

(2) "Owner" means the party or parties with the fee ownership in the land, a lessee with a lease covering the premises for the years when current use classification is in effect, and the contract vendee where land is subject to a real estate contract.

(3) "Persons of low income" means an individual or family whose current income does not exceed fifty percent of the median income, scaled by family size, for the area in which the building is located. Median income is measured by the most recent statistics published by the United States department of housing and urban development for counties within a standard metropolitan statistical area, and for other areas, by estimates prepared and filed by the department of community development with the office of the code reviser for publication in the Washington state register.

(4) "Rents set below market rates" means rents that are:

(a) Set in accordance with an agreement with the United States department of housing and urban development or other federal agency, or a local housing authority, to carry out a government program to provide housing for persons of low income, and that are equal to or less than the fair rental rate promulgated for such low-income housing by the United States or the housing authority; or

(b) Equal to or less than fifteen percent of the median income, scaled by using the occupancy for the unit authorized by the local building code for family size, for the area in which the building is located.

NEW SECTION. Sec. 3. (1) Any property occupied by a building that meets the following criteria may be classified as "devoted primarily to low-income housing," and valued and taxed at its current use value unless disqualified under subsection (3) of this section:

(a) At least fifty percent of the rentable floor area of the building shall be occupied at all times for residential purposes by persons of low income. The remainder of the building may be occupied as residences paying higher rents or by the owner or the owner's manager or agents, may be devoted to commercial tenants and generating commercial income, may be committed to other uses, or may be vacant for up to six months, as long as the remainder does not impair the habitability of the units rented for housing to persons of low income;

(b) At least five dwelling units in the building must be leased to or occupied by persons of low income;

(d) The building and the dwelling units rented to persons of low income must comply with local health and safety standards.

(2) A classification of a property occupied by a building devoted primarily to low-income housing applies to the entire parcel, including ancillary areas used for parking, lawn, garden, or landscaping.

(3) The following properties are not eligible for classification as property "devoted primarily for low-income housing":

(a) Slums: (i) Property with a residential building under a municipal or judicial order for abatement; (ii) property with a building that the local jurisdiction has found to violate local health and safety standards and on which compliance has not been completed or satisfactory progress shown within sixty days after notice; or (iii) property that is repeatedly cited for a substantial violation of a local code standard.

(b) Institutional housing: (i) Residential units that serve an institution, when payments for health care, education, or other institutional services are made by or for the occupants to the owner in addition to rent for the dwelling; or (ii) privately owned student housing, including fraternities and sororities, and resorts for recreational purposes. This subsection (3)(b) does not exclude from eligibility housing that is devoted to persons of low income under contract to a governmental organization or private nonprofit health care organization.

(c) Employee housing: Property used primarily for industrial, commercial, institutional, farm, or agricultural purposes or as timber land in which the dwelling units identified as devoted to use by persons of low income are occupied by employees of the owner, contract workers for the owner, or relatives of the owner.

(d) Any acreage beyond five acres: That portion of a parcel or tract that exceeds five acres, the maximum acreage eligible for classification in any particular parcel or tract.

(4) The classification established under this section shall be in effect for taxes payable for the year for which the application is approved and for each subsequent year until (a) withdrawn by the owner or (b) found ineligible by the assessor.

NEW SECTION. Sec. 4. (1) An owner may apply to the county assessor for classification of a parcel as "devoted primarily to low-income housing" at any time. Applications made on or before the last day of December shall be processed for taxes payable the following year.

(2) When practical, applications shall be made upon forms prepared by the department and supplied by the county assessor. A document that contains the essential information requested by the state form shall be processed as an application whenever the approved forms are not available. The application shall contain a verification or statement under penalty of perjury that the information supplied is true and correct. The application shall require the applicant to inform the county assessor if there is a substantial change in circumstances that would affect the continuing validity of information supplied in the application. The county assessor shall provide reasonable assistance to applicants in completing the form.

(3) When the property lies in an incorporated area, the county assessor shall send a copy of the application to the chief executive officer of the city or town or to a subordinate municipal officer designated by him or her for review. When the property lies in an unincorporated area, the county assessor shall transmit a copy of the application for review to the official who administers the county building codes unless the county legislative authority designates another official. When a municipal boundary bisects property subject to an application, officials of each affected municipality shall receive a copy of the application. Before a reviewing official recommends denial of an application, the reviewer shall inform the owner of the proposed revision and allow the owner an opportunity to submit additional information.

(4) Processing of forms shall respect the right of privacy of persons of low income and shall not disclose their names or data about them unless absolutely necessary. The processing shall also preserve the confidentiality of financial information supplied by the owner.

(5) The county or city legislative authority may require a reasonable application fee, which fee shall accompany the application.

(6) A county assessor may delegate the performance of any or all of the activities specified by this section to the municipal officials of the jurisdiction in which the property is located.

NEW SECTION. Sec. 5. (1) The reviewing municipal official shall report to the county assessor whether or not the property qualifies for the classification. The reviewing official may contact the applicant, examine documents and records, interview occupants, and enter and inspect the premises during reasonable business hours to determine compliance with the requirements of this chapter. The report shall be filed with the county assessor within forty-five days after the application was received. A reviewing official may request additional time, if needed, on account of delays in securing information from an applicant.

(2) The county assessor shall grant the classification if the report of the reviewing official recommends approval of the application and shall deny the application if the report recommends denial.

(3) If no timely report is received from a reviewing official, the county assessor shall inform the applicant. An applicant may then apply to the county board of equalization for relief. The board may grant the classification, order the classification granted unless the reviewing official shows cause for a denial by a date contained in the order, or deny the application on the record already made.

(4) Property classified as "devoted primarily to low-income housing" shall be so designated on the assessment list and tax rolls and notice of that classification shall be given on the property tax statement sent to the owner.

NEW SECTION. Sec. 6. The true and fair value of property classified as "devoted primarily for low-income housing" shall be the lesser of its value based on its current use and its value if it were assessed without regard to its classification. In computing its value based on its current use, the assessor shall disregard potential uses that might return a higher income, rents that might be charged were the owner to maximize returns, and values of the property that suppose either the land or the improvements were unencumbered by its current commitment to low-income housing.

NEW SECTION. Sec. 7. To be sure that the classification is intended to remain in effect each year, a county assessor may require the owner to certify information about the building's occupancy by persons of low income and the rents paid.

NEW SECTION. Sec. 8. When land has once been classified under this chapter, it shall remain under such classification and shall not be applied to other use for at least ten years from the date of classification and shall continue under such classification until and unless withdrawn from classification after notice of request for withdrawal shall be made by the owner. During any year after eight years of the initial ten-year classification period have elapsed, notice of request for withdrawal of all or a portion of the land, which shall be irrevocable, may be given by the owner to the county assessor or assessors of the county or counties in which such land is situated. In the event that a portion of a parcel is removed from classification, the remaining portion must meet the same requirements as did the entire parcel when such land was originally granted classification pursuant to this chapter. Within seven days the county assessor shall transmit one copy of such notice to the reviewing official which originally approved the application. The county assessor or assessors, as the case may be, shall, when two assessment years have elapsed following the date of receipt of such notice, withdraw such land from such classification and the land shall be subject to the additional tax due under section 12 of this act: PROVIDED, That agreement to tax according to use shall not be considered to be a contract and can be abrogated at any time by the legislature in which event no additional tax or penalty shall be imposed.

NEW SECTION. Sec. 9. When land which has been classified under this chapter, except through compliance with section 8 of this act, or except as a result solely from any one of the conditions listed in section 12(5) of this act, the owner shall within sixty days notify the county assessor of such change in use and additional real property tax shall be imposed upon such land in an amount equal to the sum of the following:

(1) The total amount of the additional tax due under section 12 of this act; plus

(2) A penalty amounting to twenty percent of the amount determined in subsection (1) of this section.

Any person who has information that the property no longer qualifies for the classification may supply the information to the county assessor. Upon receipt of such information, the county assessor shall promptly refer the matter to the reviewing official for a report and recommendation on whether the property should be removed from classification.

NEW SECTION. Sec. 10. The additional tax and penalties, if any, provided by sections 8 and 9 of this act shall be extended on the tax roll and shall be, together with the interest thereon, a lien on the land to which such tax applies as of January 1st of the year for which such additional tax is imposed. Such lien shall have priority as provided in chapter 84.60 RCW: PROVIDED, That for purposes of all periods of limitation of actions specified in this title, the year in which the tax became payable shall be as specified in section 11 of this act.

NEW SECTION. Sec. 11. The additional tax, penalties, and/or interest provided by sections 8 and 9 of this act shall be payable in full thirty days after the date which the treasurer's statement therefor is rendered. Such additional tax when collected shall be distributed by the county treasurer in the same manner in which current taxes applicable to the subject land are distributed.

NEW SECTION. Sec. 12. (1) When land has once been classified under this chapter, a notation of such designation shall be made each year upon the assessment and tax rolls and such land shall be valued pursuant to this chapter until removal of all or a portion of such designation by the assessor upon occurrence of any of the following:

(a) Receipt of notice from the owner to remove all or a portion of such designation;

(b) Sale or transfer to an ownership making all or a portion of such land exempt from ad valorem taxation;

(c) Sale or transfer of all or a portion of such land to a new owner, unless the new owner has signed a notice of classification continuance. The signed notice of continuance shall be attached to the real estate excise tax affidavit provided for in RCW 82.45.120. The notice of continuance shall be on a form prepared by the department. If the notice of continuance is not signed by the new owner and attached to the real estate excise tax affidavit, all additional taxes calculated pursuant to subsection (3) of this section shall become due and payable by the seller or transferor at time of sale. The county auditor shall not accept an instrument of conveyance of classified land for filing or recording unless the new owner has signed the notice of continuance or the additional tax has been paid. The seller, transferor, or new owner may appeal the new assessed valuation calculated under subsection (3) of this section to the county board of equalization. Jurisdiction is hereby conferred on the county board of equalization to hear these appeals;

(d) Determination by the reviewing official, after giving the owner written notice and an opportunity to be heard, that all or a portion of such land is no longer primarily devoted to and used for the purposes under which it was granted classification.

(2) Within thirty days after such removal of all or a portion of such land from current use classification, the assessor shall notify the owner in writing, setting forth the reasons for such removal. The seller, transferor, or owner may appeal such removal to the county board of equalization.

(3) Unless the removal is reversed on appeal, the assessor shall revalue the affected land with reference to full market value on the date of removal from classification. Both the assessed valuation before and after the removal of classification shall be listed and taxes shall be allocated according to that part of the year to which each assessed valuation applies. Except as provided in subsection (5) of this section, an additional tax shall be imposed which shall be due and payable to the county treasurer thirty days after the owner is notified of the amount of the additional tax. As soon as possible, the assessor shall compute the amount of such an additional tax and the treasurer shall mail notice to the owner of the amount thereof and the date on which payment is due. The amount of such additional tax shall be equal to:

(a) The difference between the property tax paid as property "devoted to low-income housing" and the amount of property tax otherwise due and payable for the seven years last past had the land not been so classified; plus

(b) Interest upon the amounts of such additional tax paid at the same statutory rate charged on delinquent property taxes from the dates on which such additional tax could have been paid without penalty if the land had been assessed at a value without regard to this chapter.

(4) Additional tax, together with applicable interest thereon, shall become a lien on such land which shall attach at the time such land is removed from current use classification under this chapter and shall have priority to and shall be fully paid and satisfied before any recognizance, mortgage, judgment, debt, obligation, or responsibility to or with which such land may become charged or liable. Such lien may be foreclosed upon expiration of the same period after delinquency and in the same manner provided by law for foreclosure of liens for delinquent real property taxes as provided in RCW 84.64.050. Any additional tax unpaid on its due date shall thereupon become delinquent. From the date of delinquency until paid, interest shall be charged at the same rate applied by law to delinquent ad valorem property taxes.

(5) The additional tax specified in subsection (3) of this section shall not be imposed if the removal of designation pursuant to subsection (1) of this section resulted solely from:

(a) A taking under exercise of the power of eminent domain or a transfer to a condemning authority under threat of an exercise of the power of eminent domain;

(b) A transfer to a use that is exempt from property taxes;

(d) Destruction of the property, or such severe damage as to render the premises untenantable, through a natural disaster, such as flood, landslide, or earthquake, or a calamity beyond the owner's control, such as fire.

NEW SECTION. Sec. 13. An aggrieved owner, municipality, and the department may appeal an action granting or denying a classification to the classification of "devoted primarily to low-income housing" or granting or denying a redesignation from such a classification to the county board of equalization. The appeal shall be filed within thirty days by serving a copy upon the reviewing officer and the county board of equalization. The appeal shall be processed in the same manner as appeals from property valuations. Any party with a right to appeal may intervene in an appeal filed by another party. The decision of the county board of equalization is final, subject to judicial review.

NEW SECTION. Sec. 14. The department may adopt rules to implement this chapter.

The department of community development may prepare and publish data on median income to implement this chapter. The agency may make its estimates for areas outside federal standard metropolitan statistical areas on the basis of the nearest area with such data.

NEW SECTION. Sec. 15. This chapter shall be liberally construed to accomplish its purposes. This chapter shall also be interpreted as granting reviewing officials designated by a city or county the authority to carry out the functions contemplated by section 5 of this act.

NEW SECTION. Sec. 16. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 17. Sections 1 through 16 of this act shall constitute a new chapter in Title 84 RCW.

NEW SECTION. Sec. 18. This act shall take effect upon the effective date of an amendment to Article VII, section 11 of the Washington state Constitution to authorize current use valuation of property with buildings that meet health and safety standards and are devoted primarily to low-income housing, and contain five or more low-income dwelling units. If such amendment is not validly submitted to and approved by the voters at the November 1990 general election, this act shall be null and void in its entirety.