WHEREAS, The Washington State Legislature recognizes and applauds the achievements and contributions of its citizens; and

             WHEREAS, Janeen Cook's family are longtime residents of Shoreline, Washington; and

             WHEREAS, Janeen Cook's family has a history of contributions to the community, starting with her grandfather who owned a sawmill on Echo Lake; and

             WHEREAS, Janeen Cook generously served her community by volunteering at the Shoreline Public Library every week, tirelessly organizing the library's yearly book sale, and serving in the neighborhood storefront for the Shoreline Police Department; and

             WHEREAS, Her commitment to peace, fairness, and harmony guided her to be one of the originators of the Sound Non-Violent Opposition to War, and a drum major for peace and justice; and

             WHEREAS, Janeen Cook exemplified the ideal of civic-mindedness in her service to the 32nd district and was well-known and respected by the Democrats in that district; and

             WHEREAS, Janeen Cook was a dedicated and loyal employee of US West for over thirty years; and

             WHEREAS, Janeen Cook's life of continued civic engagement and community involvement is an example to all Washingtonians;

             NOW, THEREFORE, BE IT RESOLVED, That the House of Representatives celebrate and honor the life of Janeen Cook and extend to her family: Her husband, John; her son, Michael; her daughter-in-law, Amy; and her beloved granddaughter, Cameron, our sincere sympathy and condolences; and

             BE IT FURTHER RESOLVED, That copies of this resolution be immediately transmitted by the Chief Clerk of the House of Representatives to the family of Janeen Cook.

             HOUSE RESOLUTION NO. 4726 was adopted.

             There being no objection, the Rules Committee was relieved of ENGROSSED SUBSTITUTE SENATE BILL NO. 5431, and the bill was placed on the second reading calendar.

MESSAGES FROM THE SENATE

March 10, 2004

Mr. Speaker:

             The Senate has passed:

SENATE BILL NO. 6448,

SENATE BILL NO. 6490,

SENATE BILL NO. 6515,

and the same are herewith transmitted.

Milt H. Doumit, Secretary

March 10, 2004

Mr. Speaker:

             The Senate concurred in the House amendment to the following bills and passed the bills as amended by the House:

SUBSTITUTE SENATE BILL NO. 5326,

ENGROSSED SUBSTITUTE SENATE BILL NO. 5877,

SUBSTITUTE SENATE BILL NO. 6107,

SUBSTITUTE SENATE BILL NO. 6189,

SENATE BILL NO. 6339,

ENGROSSED SUBSTITUTE SENATE BILL NO. 6472,

SUBSTITUTE SENATE BILL NO. 6575,

SECOND SUBSTITUTE SENATE BILL NO. 6599,

and the same are herewith transmitted.

Milt H. Doumit, Secretary

March 10, 2004

Mr. Speaker:

             The Senate concurred in the House amendment to the following bills and passed the bills as amended by the House:

ENGROSSED SECOND SUBSTITUTE SENATE BILL NO. 5957,

SUBSTITUTE SENATE BILL NO. 6148,

SUBSTITUTE SENATE BILL NO. 6155,

ENGROSSED SENATE BILL NO. 6188,

SUBSTITUTE SENATE BILL NO. 6302,

ENGROSSED SECOND SUBSTITUTE SENATE BILL NO. 6358,

SUBSTITUTE SENATE BILL NO. 6402,

SENATE BILL NO. 6488,

ENGROSSED SECOND SUBSTITUTE SENATE BILL NO. 6489,

SUBSTITUTE SENATE BILL NO. 6560,

ENGROSSED SUBSTITUTE SENATE BILL NO. 6642,

SENATE BILL NO. 6643,

SUBSTITUTE SENATE BILL NO. 6655,

SENATE BILL NO. 6663,

SUBSTITUTE SENATE BILL NO. 6676,

and the same are herewith transmitted.

Milt H. Doumit, Secretary

             There being no objection, the House advanced to the sixth order of business.

SECOND READING

             HOUSE BILL NO. 2295, By Representatives Quall, Talcott, Rockefeller and Anderson

             Authorizing charter schools.

             The bill was read the second time. There being no objection, Second Substitute House Bill No. 2295 was substituted for House Bill No. 2295 and the second substitute bill was placed on the second reading calendar.

             SECOND SUBSTITUTE HOUSE BILL NO. 2295 was read the second time.

             With the consent of the House, amendments (1201), (1200), (1191) and (1205) were withdrawn.

             Representative McDermott moved the adoption of amendment (1202):

              On page 2, line 12, after "demonstrate" strike "how" and insert "whether"

              On page 19, line 5, after "schools" insert "including the impact on the school districts in which they are located"

              On page 19, line 12, after "process." insert "The institute also shall recommend whether the charter school program should be expanded, allowed to operate at the currently permitted levels, or terminated when contracts then in force are completed. If the Washington institute for public policy study demonstrates that all charter schools are not performing at the same level or better than the regular public schools where the charter is located; and if the proportion of disadvantaged students is not higher in all charter schools than the regular public schools where the charter is located; then this act shall expire effective August 31, 2009. All existing charters shall thereby be closed by August 31, 2009."

              Correct the title.

             Representatives McDermott and Santos spoke in favor of the adoption of the amendment.

             Representatives Hunter and Talcott spoke against the adoption of the amendment.

             The amendment was not adopted.

             Representative McMahan moved the adoption of amendment (1198):

              On page 2, line 37, after "school" insert ", and may include one member of the local school district board of directors who may serve as an ex officio member"

              On page 4, after line 29, insert "(4) A local school district board may appoint one of its directors to serve as an ex officio member of the board of directors of a charter school located in the school district."

             Representatives McMahan and Quall spoke in favor of the adoption of the amendment.

             The amendment was adopted.

             Representative Cox moved the adoption of amendment (1196):

              On page 3, line 22, after "directors of" strike "the school district" and insert "a school district that serves more than three thousand five hundred students"

             Representatives Cox, McDermott, Santos and Chase spoke in favor of the adoption of the amendment.

             Representatives Rockefeller, Tom, Anderson and Hunter spoke against the adoption of the amendment.

             The amendment was not adopted.

             Representative Chase moved the adoption of amendment (1203):

              On page 4, line 24, after "events" insert "and activities"

              On page 16, after line 28, insert the following:

              "(8) If a charter school closes prior to the end of a school year, the state must fund the entire cost of reopening the school.

              (9) The state shall provide full funding for each student returned to the regular public school system if a charter school shuts down unexpectedly without fulfilling all requirements of this section."

             Representatives Chase and Santos spoke in favor of the adoption of the amendment.

             Representatives Hunter and Talcott spoke against the adoption of the amendment.

             The amendment was not adopted.

             Representative Chase moved the adoption of amendment (1204):

              On page 4, beginning on line 31, after "twelve," strike everything through "applicant" on line 33 and insert "managed by a school district board of directors"

              On page 2, beginning on line 18, after "means" strike all material through "(b)" on line 22

              On page 9, beginning on line 6, after "superintendent" strike all material through "superintendent" on line 11

              On page 10, line 2, after "by" strike all material through "or"

             Representatives Chase and McDermott spoke in favor of the adoption of the amendment.

             Representatives Anderson and Quall spoke against the adoption of the amendment.

             The amendment was not adopted.

             Representative G. Simpson moved the adoption of amendment (1207):

              On page 5, at the end of line 24, insert "(c) Provide transportation for charter school students using routes comparable to the transportation routes used by the school district in which the charter school is located;"

              On page 19, line 36, after "chapter," strike "a majority of the annual number of" and insert "all"

              On page 20, line 1, after "section" strike "are reserved to implement" and insert "must be"

              On page 20, line 3, after "and" strike "that are"

              On page 20, line 10, after "2001" strike everything through "year" on line 15

              On page 20, line 21, after "approved" strike everything through "students" on line 22

              On page 20, line 27, after "section" strike everything through "section" on line 29

              On page 20, at the beginning of line 31, strike "subsections" and insert "subsection"

              On page 20, line 31, after "(1)" strike "and (2)"

              On page 20, at the beginning of line 34, strike everything through "section." on page 21, line 4.

              Renumber subsections accordingly.

             Representatives G. Simpson, McDermott, Santos, G. Simpson (again) and Chase spoke in favor of the adoption of the amendment.

             Representatives Tom, Quall, Hunter and Talcott spoke against the adoption of the amendment.

             Division was demanded. The Speaker (Representative Lovick presiding) divided the House. The result was 34 - YEAS; 63 -NAYS.

             The amendment was not adopted.

             Representative Chase moved the adoption of amendment (1199):

              On page 11, at the end of line 24, strike "and"

              On page 11, line 26, after "components" insert "; and

              (17) A description of the provisions for regular maintenance of conversion charter school facilities owned by the school district"

              On page 13, line 11, after "charter;" strike "and"

              On page 13, line 12, after "adequate" insert "; and

              (17) A majority of voters voting in the school district approve of the school district board's resolution to approve the charter"

             Representatives Chase, G. Simpson, McDermott, Chase (again) and Santos spoke in favor of the adoption of the amendment.

             Representatives Hunter, Anderson and Rockefeller spoke against the adoption of the amendment.

             The amendment was not adopted.

             Representative Conway moved the adoption of amendment (1194):

              On page 21, beginning on line 24, strike all of sections 17 through 20 and insert the following:

              "NEW SECTION. Sec. 17. A new section is added to chapter 41.56 RCW to read as follows:

              (1) This chapter applies to classified employees of charter schools created under chapter 28A.-- RCW (sections 1 through 16 and 23 of this act) as follows:

              (a) Notwithstanding RCW 41.56.060 and 41.56.070, the employees of a new charter school shall be members of an existing appropriate bargaining unit of employees of the school district in which the charter school is located.

              (b) At the time of creation of a conversion charter school, the employees of the charter school remain in the existing appropriate bargaining unit of employees of the school district in which the charter school is located.

              (2) If an applicant for a charter school or a charter school board requests one or more variances from a collective bargaining agreement that applies to a school district bargaining unit to address specific needs of the charter school and the employees of the charter school, the school district, in consultation with the applicant or charter school board, and the exclusive bargaining representative of the bargaining unit shall negotiate concerning the issues raised in the variance request.

              NEW SECTION. Sec. 18. A new section is added to chapter 41.59 RCW to read as follows:

              (1) This chapter applies to educational employees of charter schools created under chapter 28A.-- RCW (sections 1 through 16 and 23 of this act) as follows:

              (a) Notwithstanding RCW 41.59.070 and 41.59.080, the employees of a new charter school shall be members of an existing appropriate bargaining unit of employees of the school district in which the charter school is located.

              (b) At the time of creation of a conversion charter school, the employees of the charter school remain in the existing appropriate bargaining unit of employees of the school district in which the charter school is located.

              (2) If an applicant for a charter school or a charter school board requests one or more variances from a collective bargaining agreement that applies to a school district bargaining unit to address specific needs of the charter school and the employees of the charter school, the school district, in consultation with the applicant or charter school board, and the exclusive bargaining representative of the bargaining unit shall negotiate concerning the issues raised in the variance request."

              Renumber the sections consecutively and correct any internal references accordingly. Correct the title.

             Representatives Conway, G. Simpson, Cooper, Moeller and Chase spoke in favor of the adoption of the amendment.

             Representatives Tom, Anderson, Ahern and Rockefeller spoke against the adoption of the amendment.

             Division was demanded. The Speaker (Representative Lovick presiding) divided the House. The result was 40 - YEAS; 57 -NAYS.

             The amendment was not adopted.

             Representative Chase moved the adoption of amendment (1206):

              On page 24, after line 29, insert the following:

              "NEW SECTION. Sec. 28. The secretary of state shall submit this act to the people for their adoption and ratification, or rejection, at the next general election to be held in this state, in accordance with Article II, section 1 of the state Constitution and the laws adopted to facilitate its operation."

              Correct the title.

             Representatives Chase, Santos and McDermott spoke in favor of the adoption of the amendment.

             Representatives Quall and Talcott spoke against the adoption of the amendment.

             The amendment was not adopted.

             Representative Chase moved the adoption of amendment (1062):

              Strike everything after the enacting clause and insert the following:

              "NEW SECTION. Sec. 1. INTENT. The legislature intends to authorize the establishment of public charter schools within the general and uniform system of public schools for the exclusive purpose of providing more high-quality learning environments to assist historically underserved populations of students in meeting the state's academic standards. The legislature intends for charter schools to function as an integral element of the public school system maintained at public expense, free from discrimination, and open to all students in the state, and to be subject to greater academic standards and performance outcomes than other public schools. The legislature intends to ensure accountability of charter schools through the use of performance audits and a comprehensive study of charter schools, and to use the information generated to demonstrate how charter schools can contribute to raising student academic achievement.

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

              (1) "Applicant" means a nonprofit corporation that has submitted an application to a sponsor. The nonprofit corporation must be either a public benefit nonprofit corporation as defined in RCW 24.03.490, or a nonprofit corporation as defined in RCW 24.03.005 that has applied for tax-exempt status under section 501(c)(3) of the internal revenue code of 1986 (26 U.S.C. Sec. 501(c)(3)). The nonprofit corporation may not be a sectarian or religious organization and must meet all of the requirements for a public benefit nonprofit corporation before receiving any funding under section 12 of this act.

              (2) "Charter school management team" means the management team appointed or contractually engaged by the nonprofit applicant to manage and operate the charter school.

              (3) "Charter" means a one-year contract between an applicant and a sponsor. The charter establishes, in accordance with this chapter, the terms and conditions for the management, operation, and educational program of the charter school.

              (4) "Charter school" means a public school managed by a nonprofit corporation and operating according to the terms of a charter approved under this chapter.

              (5) "Historically underserved populations of students" includes students with limited English proficiency; students with special needs, including students with disabilities; and economically disadvantaged students, including students who qualify for free and reduced priced meals.

              (6) "New charter school" means any charter school created under this chapter.

              (7) "Sponsor" means the board of directors of the school district in which the proposed charter school will be located.

              NEW SECTION. Sec. 3. CHARTER SCHOOLS--POWERS. (1) To carry out its duty to manage and operate the charter school, the charter school management team may:

              (a) Hire, manage, and discharge any charter school employee in accordance with the terms of collective bargaining agreements in the district;

              (b) Enter into a contract with any school district, or any other public or private entity, also empowered to enter into contracts, for any and all real property, equipment, goods, supplies, and services, including educational instructional services; however, this authority does not permit assigning, delegating, or contracting out the administration and management of a charter school to a for-profit entity;

              (c) Rent, lease, or own property, but may not acquire property by eminent domain;

              (d) Accept and administer for the benefit of the charter school and its students, gifts, grants, and donations from other governmental and private entities, excluding sectarian or religious organizations. Charter schools may not accept any gifts or donations the conditions of which violate this chapter.

              (2) A charter school may not charge tuition, levy taxes, or issue tax-backed bonds, however it may charge fees for optional noncredit extracurricular events.

              (3) A charter school sponsor is not liable for acts or omissions of a charter school or its charter school management team, including but not limited to acts or omissions related to the application, the charter, the operation, the performance, and the closure of the charter school.

              NEW SECTION. Sec. 4. LEGAL STATUS. A charter school is a public school including one or more of grades kindergarten through twelve, operated by a management team selected by the board of directors of the nonprofit applicant operating under the sponsorship and supervision of an elected public school board of directors, according to the terms of a renewable one-year contract granted by a sponsor. A charter school must allow students who are receiving home-based instruction under chapter 28A.200 RCW to participate in its programs on a part-time basis.

              NEW SECTION. Sec. 5. CHARTER SCHOOLS--EXEMPTIONS. (1) A charter school shall operate according to the terms of a charter approved by a sponsor.

              (2) Charter schools must adhere to all state statutes and rules applicable to school districts and school district boards of directors, except when exempted by negotiated waivers.

              (3) A charter school's management team shall implement a quality management system and conduct annual self-assessments.

              (4) Each approved charter school shall conduct annual self-assessments of its quality management program.

              (5) A member of a board of directors of the nonprofit applicant of a charter school is a board member of a school district for the purposes of public disclosure requirements and must comply with the reporting requirements in RCW 42.17.240.

              NEW SECTION. Sec. 6. ADMISSION REQUIREMENTS. (1) To effectuate the primary purpose for which the legislature established charter schools, a charter school must enroll historically underserved populations of students. Consistent with the legislative intent of this chapter, a charter school shall conduct timely outreach and marketing efforts to historically underserved populations of students in the school district in which the charter school will be located.

              (2) A new charter school must enroll all students who submit a timely application if capacity is sufficient. If capacity is insufficient to enroll all students who apply, students must be selected to fill any remaining spaces only through an equitable selection process, such as a lottery. Siblings of enrolled students must be given priority in enrollment.

              NEW SECTION. Sec. 7. CHARTER APPLICATION--CHARTERING PROCESS. (1) An applicant may apply to a sponsor to establish a charter school under this section. An application may not be submitted earlier than eighteen months before, nor later than four months before, the proposed date of opening the school.

              (2) The sponsoring public school board shall establish guidelines for the timely receipt and approval of applications to facilitate the efficient implementation of this act. Guidelines established under this subsection shall reflect efficient processes for the expeditious and orderly start-up of charter schools in a timely manner for the purpose of serving historically underserved populations of students.

              (3) An application for a charter school must be submitted to the publicly elected board of directors of the school district in which the proposed charter school will be located, allowing for the board's consideration of the application in accordance with subsections (4) and (5) of this section. A copy of each application submitted to a sponsor also must be provided to the superintendent of public instruction.

              (4) The school district board of directors must decide, within forty-five days of receipt of the application, whether to hold a public hearing in the school district to take public comment on the application and, if a hearing is to be held, must schedule it within seventy-five days of receipt of the application. If the school board intends to accept the application, one or more public hearings must be held before granting a charter; however a school board is not required to hold a public hearing before rejecting an application. The school board must either accept or reject the application within one hundred five days after receipt of the application. The one hundred five-day deadline for accepting or rejecting the charter school application may be extended for an additional thirty days if both parties agree in writing.

              (5) If the school board does not hold a public hearing or rejects the application after holding one or more public hearings, the school board must notify the applicant in writing of the reasons for that decision. The applicant may submit a revised application for the school board's reconsideration and the school board may provide assistance to improve the application. If the school board rejects the application after a revised application is submitted, the school board must notify the applicant in writing of the reasons for the rejection.

              NEW SECTION. Sec. 8. APPLICATION REQUIREMENTS. The charter school application is a proposed contract and must include:

              (1) The identification and description of the nonprofit corporation submitting the application, including the names, descriptions, curriculum vitae, and qualifications of the individuals who will operate the school, all of which are subject to verification and review;

              (2) The nonprofit corporation's articles of incorporation, bylaws, and most recent financial statement and balance sheet;

              (3) A mission statement for the proposed charter school, consistent with the description of legislative intent in this chapter, declaring the proposed charter school's primary purpose is to provide high-quality learning environments to assist historically underserved populations of students in meeting the state's academic standards;

              (4) A description of the school's educational program, curriculum, and instructional strategies, including but not limited to how the charter school will assist its students in meeting the state's academic standards;

              (5) A description of the school's admissions policy and marketing program, and its deadlines for applications and admissions, including its program for community outreach to families of historically underserved populations of students;

              (6) A description of the school's student performance standards and requirements that must exceed those determined under chapter 28A.655 RCW, and be measured according to the assessment system determined under chapter 28A.655 RCW;

              (7) A description of the school's plan to evaluate student performance and the procedures for taking corrective action if student performance at the charter school falls below standards established in its charter;

              (8) A description of the financial plan for the school. The plan shall include: (a) A proposed one-year budget of projected revenues and expenditures; (b) a plan for starting the school; (c) a one-year facilities plan; (d) evidence supporting student enrollment projections of at least twenty students; and (e) a description of major contracts planned for administration, management, equipment, and services, including consulting services, leases, improvements, real property purchases, and insurance;

              (9) A description of the proposed financial management procedures and administrative operations, which shall meet or exceed generally accepted standards of management and public accounting;

              (10) An assessment of the school's potential legal liability and a description of the types and limits of insurance coverage the nonprofit corporation plans to obtain. A liability insurance policy, negotiated with the school board, up to fifty million dollars is required;

              (11) A description of the procedures to discipline, suspend, and expel students;

              (12) A description of procedures to assure the health and safety of students, employees, and guests of the school and to comply with applicable federal and state health and safety laws and regulations;

              (13) A description of the school's program for parent involvement in the charter school;

              (14) Documentation sufficient to demonstrate that the charter school will have the liquid assets available to operate the school on an ongoing and sound financial basis;

              (15) Supporting documentation for any additional requirements that are appropriate and reasonably related to operating the charter school that a public school board sponsor may impose as a condition of approving the charter;

              (16) A description of the quality management plan for the school, including its specific components; and

              (17) A description of the academic plan.

              NEW SECTION. Sec. 9. APPROVAL CRITERIA. A sponsoring public school board may approve an application for a charter school, if in the sponsor's reasonable judgment, after exercising due diligence and good faith, the sponsor finds:

              (1) The applicant is an eligible public benefit nonprofit corporation and the individuals it proposes to manage and operate the school are qualified to operate a charter school and implement the proposed academic plan that is free from religious or sectarian influence;

              (2) The public benefit nonprofit corporation has been approved or conditionally approved by the internal revenue service for tax exempt status under section 501(c)(3) of the internal revenue code of 1986 (26 U.S.C. Sec. 501(c)(3));

              (3) The mission statement is consistent with the description of legislative intent and restrictions on charter school operations in this chapter. The sponsor must make a finding of whether or not the charter school's primary purpose is to serve historically underserved populations of students;

              (4) The school's educational program, including its curriculum and instructional strategies, is likely to assist its students, including its historically underserved populations of students, in meeting the state's academic standards;

              (5) The school's admissions policy and marketing program is consistent with state and federal law, and includes community outreach to families of historically underserved populations of students;

              (6) The school's proposed educational program includes student academic performance standards and requirements that exceed those determined under chapter 28A.655 RCW and are measured according to the assessment system determined under chapter 28A.655 RCW;

              (7) The application includes a viable plan to evaluate pupil performance and procedures to take appropriate corrective action if pupil performance at the charter school falls below standards established in its charter;

              (8) The financial plan for the school is designed to reasonably support the charter school's educational program based on a review of the proposed one-year budget of projected revenues, expenditures, and facilities;

              (9) The school's financial and administrative operations, including its audits, exceed generally accepted standards of accounting and management;

              (10) The assessment of the school's potential legal liability, and the types and limits of insurance coverage the school plans to obtain, are adequate. A liability insurance policy of up to fifty million dollars, negotiated with the school board, is required;

              (11) The procedures the school plans to follow to discipline, suspend, and expel students comply with school district policy and state and federal law;

              (12) The procedures the school plans to follow to assure the health and safety of students, employees, and guests of the school comply with applicable school district, state, and federal health and safety laws and regulations;

              (13) The school has developed a program for parent involvement in the charter school;

              (14) The charter school will have the liquid assets available to operate the school on an ongoing and sound financial basis;

              (15) The procedures the school plans to follow to assure high academic standards;

              (16) The applicant has met any additional requirements that are appropriate and reasonably related to the operation of a charter school that the sponsoring school board imposed as a condition for approval of the charter; and

              (17) The quality management plan for the school is adequate.

              NEW SECTION. Sec. 10. CHARTER AGREEMENT--AMENDMENT. (1) A charter application approved by a school board sponsor with any changes or additions, and signed by an authorized representative of the applicant and the sponsor, constitutes a charter.

              (2) A charter may be amended during its term at the request of the charter school management team and the nonprofit board of directors and on the approval of the sponsoring public school board.

              (3) A charter may not prohibit and must provide for the application of laws applicable to charter schools or to charter school nonprofit boards of directors and management teams enacted after the effective date of this section.

              NEW SECTION. Sec. 11. CHARTER RENEWAL AND REVOCATION. (1) An approved plan to establish a charter school is effective for one year from the first day of operation. At the conclusion of the first six months of operation, the charter school may apply to the sponsor for renewal. A request for renewal must be submitted no later than four months before the expiration of the charter.

              (2) A charter school renewal application must include:

              (a) A report on the progress of the charter school in achieving the goals; student academic achievement, including the student performance standards adopted by the academic achievement and accountability commission in accordance with RCW 28A.655.030; the number and percentage of historically underserved populations of students served; and other terms of the charter;

              (b) A financial statement that discloses the costs of administration, instruction, and other expenditure objects and activities of the charter school; and

              (c) All audit information from independent sources regarding the charter school, if available, and all self assessments and corresponding corrective action plans.

              (3) The sponsor may reject the application for renewal if any of the following occurred:

              (a) The charter school materially violated its charter with the sponsor;

              (b) The charter school failed to meet generally accepted standards of fiscal management;

              (c) The charter school violated provisions in law that have not been waived in accordance with this chapter; or

              (d) The charter school has failed to deliver high academic standards to their students.

              (4) A sponsor shall give written notice of its intent not to renew the charter school's request for renewal to the charter school within one month of the request for renewal in order to allow the charter school an opportunity to correct identified deficiencies in its operation. At the request of the management team of the charter school, the sponsor shall review its decision for nonrenewal within forty-five days of receiving the request for review and the supporting documentation demonstrating the correction of the deficiencies.

              (5)(a) The sponsor may revoke a previously approved charter before the expiration of the term of the charter, and before application for renewal, if any of the following occurred:

              (i) The charter school materially violated its charter with the sponsor;

              (ii) The charter school failed to meet generally accepted standards of fiscal management;

              (iii) The charter school violated provisions in law that have not been waived in accordance with this chapter; or

              (iv) The charter school failed to deliver high academic standards to their students.

              (b) Except in cases of emergency where the health and safety of children are at risk, a charter may not be revoked unless the sponsor first provides:

              (i) Written notice to the charter school of the specific violations alleged;

              (ii) One or more public hearings in the school district in which the charter school is located; and

              (iii) A reasonable opportunity and a sufficient period of time for the charter school to correct the identified deficiencies.

              (c) If, after following the procedures in (b) of this subsection, the sponsor determines that revoking the charter is necessary to further the intent of this chapter, the sponsor may revoke the charter.

              (d) If a sponsor revokes the charter, the sponsor, upon a request by the charter school, shall provide technical assistance to the charter school to complete the plan required and carry out the tasks identified in subsection (6) of this section.

              (6) A charter school planning to close or anticipating revocation or nonrenewal of its charter shall provide a plan setting forth a timeline and the responsible parties for disposition of students and student records and disposition of finances.

              (a) Immediately following the decision to close a school, the school must:

              (i) Submit to the sponsor a list of parent addresses and proof that the school has communicated the impending closure of the school to all parents and staff;

              (ii) Assign staff responsible for transition of student records and for providing assistance to students and parents in transferring from the charter school to the district public, private, or home school chosen by the family;

              (iii) Provide the names and contact information for staff responsible for transfer of student records to the central administration of the sponsoring school district, as well as the projected transition tasks and timelines to the sponsor.

              (b) Before closing the charter school the charter school management team shall:

              (i) Determine the amount of anticipated revenue due to the school as well as anticipated liabilities, and provide a complete asset and liability report to the sponsor;

              (ii) Create a current and projected payroll and payroll benefits commitment;

              (iii) List each employee, job, and the funds necessary to complete the educational calendar balance of the year, the transition of students and records, and the administrative close-down tasks;

              (iv) Determine the total moneys required to complete contracts;

              (v) Schedule an audit and set aside funds to cover costs; and

              (vi) Provide the sponsor with a plan to close the school.

              NEW SECTION. Sec. 12. FUNDING. (1) The publicly elected district school board provides funding for a charter school including regular apportionment, special education, categorical, student achievement, and other nonbasic education moneys. Allocations shall be based on the statewide average staff mix ratio of all noncharter public schools from the prior school year and the school's actual FTE enrollment, except that vocational education funding for grades nine through twelve shall be provided based on eighteen and one-half percent of the charter school's actual FTE enrollment for grades nine through twelve. A charter school is not eligible for enhanced small school assistance funding. Categorical funding shall be allocated to a charter school based on the same funding criteria used for noncharter public schools. A charter school is eligible to apply for state grants on the same basis as a school district. Those allocations to a charter school that are included in RCW 84.52.0531(3) (a) through (c) shall be included in the levy base of the district in which the charter school is located.

              (2) For levies submitted to voters after the start-up date of a charter school, the school shall be included in levy planning, budgets, and funding distribution in the same manner as other district-sponsored public schools.

              NEW SECTION. Sec. 13. STUDY OF CHARTER SCHOOLS. Subject to funding, the Washington institute for public policy shall study the implementation of charter school legislation in the forty states that have charter school laws and present data to the legislature by February 1, 2005, demonstrating that the system of charter schools in those states has provided innovative, high quality alternative programs for historically underserved populations of students; has not had a negative financial impact on the regular public school system; and that student achievement in charter schools exceeds student achievement in their public school counterparts, prior to the implementation of a charter school system in Washington state.

              NEW SECTION. Sec. 14. CAPTIONS NOT LAW. Captions used in this chapter are not any part of the law.

              NEW SECTION. Sec. 15. Sections 1 through 14 of this act constitute a new chapter in Title 28A RCW.

              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."

              On page 1, line 1 of the title, after "schools;" strike the remainder of the title and insert "and adding a new chapter to Title 28A RCW."

             Representatives Chase and Santos spoke in favor of the adoption of the amendment.

             Representative DeBolt spoke against the adoption of the amendment.

             The amendment was adopted.

             The bill was ordered engrossed.

             There being no objection, the rules were suspended, the second reading considered the third and the bill was placed on final passage.

             Representatives Quall, DeBolt, Linville, Hinkle, Hunter, Rockefeller, Tom, Talcott and McDonald spoke in favor of passage of the bill.

             Representatives McDermott, Chase, Darneille, Cooper, Eickmeyer, Schual-Berke, Santos and Hunt spoke against the passage of the bill.

MOTION

             On motion of Representative Santos, Representative Edwards was excused.

             The Speaker (Representative Lovick presiding) stated the question before the House to be the final passage of Engrossed Second Substitute House Bill No. 2295.

ROLL CALL

             The Clerk called the roll on the final passage of Engrossed Second Substitute House Bill No. 2295 and the bill passed the House by the following vote: Yeas - 51, Nays - 46, Absent - 0, Excused - 1.

             Voting yea: Representatives Ahern, Alexander, Anderson, Bailey, Benson, Boldt, Buck, Bush, Cairnes, Chandler, Clibborn, Crouse, DeBolt, Delvin, Dickerson, Ericksen, Fromhold, Grant, Hinkle, Holmquist, Hunter, Jarrett, Kessler, Lantz, Linville, Mastin, McDonald, McIntire, McMahan, McMorris, Mielke, Miloscia, Morris, Nixon, Orcutt, Pettigrew, Priest, Quall, Roach, Rockefeller, Rodne, Ruderman, Schindler, Sehlin, Shabro, Sommers, Talcott, Tom, Upthegrove, Woods and Mr. Speaker - 51.

             Voting nay: Representatives Armstrong, Blake, Campbell, Carrell, Chase, Clements, Cody, Condotta, Conway, Cooper, Cox, Darneille, Dunshee, Eickmeyer, Flannigan, Haigh, Hankins, Hatfield, Hudgins, Hunt, Kagi, Kenney, Kirby, Kristiansen, Lovick, McCoy, McDermott, Moeller, Morrell, Murray, Newhouse, O'Brien, Ormsby, Pearson, Romero, Santos, Schoesler, Schual-Berke, D. Simpson, G. Simpson, Skinner, Sullivan, Sump, Veloria, Wallace and Wood - 46.

             Excused: Representative Edwards - 1.

             ENGROSSED SECOND SUBSTITUTE HOUSE BILL NO. 2295, having received the necessary constitutional majority, was declared passed.

             The Speaker assumed the chair.

SIGNED BY THE SPEAKER

             The Speaker signed:

SECOND ENGROSSED HOUSE BILL NO. 1645,

SUBSTITUTE HOUSE BILL NO. 1995,

THIRD ENGROSSED SUBSTITUTE HOUSE BILL NO. 2195,

SUBSTITUTE HOUSE BILL NO. 2300,

ENGROSSED SUBSTITUTE HOUSE BILL NO. 2354,

SUBSTITUTE HOUSE BILL NO. 2382,

HOUSE BILL NO. 2387,

SUBSTITUTE HOUSE BILL NO. 2431,

SUBSTITUTE HOUSE BILL NO. 2489,

HOUSE BILL NO. 2519,

ENGROSSED SUBSTITUTE HOUSE BILL NO. 2556,

SUBSTITUTE HOUSE BILL NO. 2635,

ENGROSSED SUBSTITUTE HOUSE BILL NO. 2650,

SUBSTITUTE HOUSE BILL NO. 2657,

SUBSTITUTE HOUSE BILL NO. 2707,

SUBSTITUTE HOUSE BILL NO. 2708,

HOUSE BILL NO. 2727,

HOUSE BILL NO. 2765,

HOUSE BILL NO. 2811,

SUBSTITUTE HOUSE BILL NO. 2878,

HOUSE BILL NO. 3045,

ENGROSSED SUBSTITUTE HOUSE BILL NO. 3078,

SUBSTITUTE HOUSE BILL NO. 3081,

SUBSTITUTE HOUSE BILL NO. 3083,

ENGROSSED SUBSTITUTE HOUSE BILL NO. 3116,

SUBSTITUTE HOUSE BILL NO. 3141,

HOUSE BILL NO. 3172,

HOUSE JOINT MEMORIAL NO. 4007,

MESSAGES FROM THE SENATE

March 10, 2004

Mr. Speaker:

             The Senate has passed ENGROSSED SUBSTITUTE HOUSE BILL NO. 2693, and the same is herewith transmitted.

Milt H. Doumit, Secretary

March 10, 2004

Mr. Speaker:

             The Senate concurred in the House amendment to the following bills and passed the bills as amended by the House:

ENGROSSED SUBSTITUTE SENATE BILL NO. 6112,

SUBSTITUTE SENATE BILL NO. 6240,

ENGROSSED SUBSTITUTE SENATE BILL NO. 6415,

SUBSTITUTE SENATE BILL NO. 6601,

SUBSTITUTE SENATE BILL NO. 6636,

SUBSTITUTE SENATE CONCURRENT RESOLUTION NO. 8418,

and the same are herewith transmitted.

Milt H. Doumit, Secretary

March 10, 2004

Mr. Speaker:

             The President has signed ENGROSSED SENATE BILL NO. 6411, and the same is herewith transmitted.

Milt H. Doumit, Secretary

March 10, 2004

Mr. Speaker:

             The President has signed:

ENGROSSED SENATE BILL NO. 5083,

SUBSTITUTE SENATE BILL NO. 5168,

SUBSTITUTE SENATE BILL NO. 5436,

SUBSTITUTE SENATE BILL NO. 5677,

ENGROSSED SENATE BILL NO. 6158,

SUBSTITUTE SENATE BILL NO. 6341,

ENGROSSED SUBSTITUTE SENATE BILL NO. 6401,

SENATE BILL NO. 6493,

and the same are herewith transmitted.

Milt H. Doumit, Secretary

March 10, 2004

Mr. Speaker:

             The President has signed:

SENATE BILL NO. 6091,

SUBSTITUTE SENATE BILL NO. 6103,

SENATE BILL NO. 6143,

SUBSTITUTE SENATE BILL NO. 6261,

SUBSTITUTE SENATE BILL NO. 6325,

SENATE BILL NO. 6326,

SUBSTITUTE SENATE BILL NO. 6501,

SUBSTITUTE SENATE BILL NO. 6581,

SUBSTITUTE SENATE BILL NO. 6688,

and the same are herewith transmitted.

Milt H. Doumit, Secretary

MESSAGE FROM THE SENATE

March 8, 2004

Mr. Speaker:

             The Senate refuses to concur in the House amendments to SECOND ENGROSSED SUBSTITUTE SENATE BILL NO. 5536 and asks the House to recede therefrom, and the same is herewith transmitted.

Milt H. Doumit, Secretary

             There being no objection, the rules were suspended and SECOND ENGROSSED SUBSTITUTE SENATE BILL NO. 5536 was returned to second reading for purpose of amendment.

SECOND READING

             SECOND ENGROSSED SUBSTITUTE SENATE BILL NO. 5536, By Senate Committee on Judiciary (originally sponsored by Senators Finkbeiner, Reardon, Roach, Hale, Horn, Benton, Morton, Hewitt, Schmidt, Kastama, Sheahan, Mulliken, Johnson, Parlette, Stevens, West and Esser)

             Resolving claims relating to condominium construction.

             The bill was read the second time.

             Representative Lantz moved the adoption of amendment (1209):

              Strike everything after the enacting clause and insert the following:

              "NEW SECTION. Sec. 1. A new section is added to chapter 64.34 RCW to read as follows:

              (1) The legislature finds, declares, and determines that:

              (a) Washington's cities and counties under the growth management act are required to encourage urban growth in urban growth areas at densities that accommodate twenty-year growth projections;

              (b) The growth management act's planning goals include encouraging the availability of affordable housing for all residents of the state and promoting a variety of housing types;

              (c) Quality condominium construction needs to be encouraged to achieve growth management act mandated urban densities and to ensure that residents of the state, particularly in urban growth areas, have a broad range of ownership choices.

              (2) It is the intent of the legislature that limited changes be made to the condominium act to ensure that a broad range of affordable homeownership opportunities continue to be available to the residents of the state, and to assist cities' and counties' efforts to achieve the density mandates of the growth management act.

              Sec. 2. RCW 64.34.100 and 1989 c 43 s 1-113 are each amended to read as follows:

              (1) The remedies provided by this chapter shall be liberally administered to the end that the aggrieved party is put in as good a position as if the other party had fully performed. However, consequential, special, or punitive damages may not be awarded except as specifically provided in this chapter or by other rule of law.

              (2) Except as otherwise provided in chapter 64.-- RCW (sections 101 through 2002 of this act), any right or obligation declared by this chapter is enforceable by judicial proceeding.

              Sec. 3. RCW 64.34.324 and 1992 c 220 s 16 are each amended to read as follows:

              (1) Unless provided for in the declaration, the bylaws of the association shall provide for:

              (a) The number, qualifications, powers and duties, terms of office, and manner of electing and removing the board of directors and officers and filling vacancies;

              (b) Election by the board of directors of such officers of the association as the bylaws specify;

              (c) Which, if any, of its powers the board of directors or officers may delegate to other persons or to a managing agent;

              (d) Which of its officers may prepare, execute, certify, and record amendments to the declaration on behalf of the association; ((and))

              (e) The method of amending the bylaws; and

              (f) A statement of the standard of care for officers and members of the board of directors imposed by RCW 64.34.308(1).

              (2) Subject to the provisions of the declaration, the bylaws may provide for any other matters the association deems necessary and appropriate.

              (3) In determining the qualifications of any officer or director of the association, notwithstanding the provision of RCW 64.34.020(32) the term "unit owner" in such context shall, unless the declaration or bylaws otherwise provide, be deemed to include any director, officer, partner in, or trustee of any person, who is, either alone or in conjunction with another person or persons, a unit owner. Any officer or director of the association who would not be eligible to serve as such if he or she were not a director, officer, partner in, or trustee of such a person shall be disqualified from continuing in office if he or she ceases to have any such affiliation with that person, or if that person would have been disqualified from continuing in such office as a natural person.

              Sec. 4. RCW 64.34.425 and 1992 c 220 s 23 are each amended to read as follows:

              (1) Except in the case of a sale where delivery of a public offering statement is required, or unless exempt under RCW 64.34.400(2), a unit owner shall furnish to a purchaser before execution of any contract for sale of a unit, or otherwise before conveyance, a resale certificate, signed by an officer or authorized agent of the association and based on the books and records of the association and the actual knowledge of the person signing the certificate, containing:

              (a) A statement disclosing any right of first refusal or other restraint on the free alienability of the unit contained in the declaration;

              (b) A statement setting forth the amount of the monthly common expense assessment and any unpaid common expense or special assessment currently due and payable from the selling unit owner and a statement of any special assessments that have been levied against the unit which have not been paid even though not yet due;

              (c) A statement, which shall be current to within forty-five days, of any common expenses or special assessments against any unit in the condominium that are past due over thirty days;

              (d) A statement, which shall be current to within forty-five days, of any obligation of the association which is past due over thirty days;

              (e) A statement of any other fees payable by unit owners;

              (f) A statement of any anticipated repair or replacement cost in excess of five percent of the annual budget of the association that has been approved by the board of directors;

              (g) A statement of the amount of any reserves for repair or replacement and of any portions of those reserves currently designated by the association for any specified projects;

              (h) The annual financial statement of the association, including the audit report if it has been prepared, for the year immediately preceding the current year.

              (i) A balance sheet and a revenue and expense statement of the association prepared on an accrual basis, which shall be current to within one hundred twenty days;

              (j) The current operating budget of the association;

              (k) A statement of any unsatisfied judgments against the association and the status of any pending suits or legal proceedings in which the association is a plaintiff or defendant;

              (l) A statement describing any insurance coverage provided for the benefit of unit owners;

              (m) A statement as to whether there are any alterations or improvements to the unit or to the limited common elements assigned thereto that violate any provision of the declaration;

              (n) A statement of the number of units, if any, still owned by the declarant, whether the declarant has transferred control of the association to the unit owners, and the date of such transfer;

              (o) A statement as to whether there are any violations of the health or building codes with respect to the unit, the limited common elements assigned thereto, or any other portion of the condominium;

              (p) A statement of the remaining term of any leasehold estate affecting the condominium and the provisions governing any extension or renewal thereof; ((and))

              (q) A copy of the declaration, the bylaws, the rules or regulations of the association, and any other information reasonably requested by mortgagees of prospective purchasers of units. Information requested generally by the federal national mortgage association, the federal home loan bank board, the government national mortgage association, the veterans administration and the department of housing and urban development shall be deemed reasonable, provided such information is reasonably available to the association; and

              (r) A statement, as required by section 301 of this act, as to whether the units or common elements of the condominium are covered by a qualified warranty, and a history of claims under any such warranty.

              (2) The association, within ten days after a request by a unit owner, and subject to payment of any fee imposed pursuant to RCW 64.34.304(1)(l), shall furnish a resale certificate signed by an officer or authorized agent of the association and containing the information necessary to enable the unit owner to comply with this section. For the purposes of this chapter, a reasonable charge for the preparation of a resale certificate may not exceed one hundred fifty dollars. The association may charge a unit owner a nominal fee for updating a resale certificate within six months of the unit owner's request. The unit owner shall also sign the certificate but the unit owner is not liable to the purchaser for any erroneous information provided by the association and included in the certificate unless and to the extent the unit owner had actual knowledge thereof.

              (3) A purchaser is not liable for any unpaid assessment or fee against the unit as of the date of the certificate greater than the amount set forth in the certificate prepared by the association unless and to the extent such purchaser had actual knowledge thereof. A unit owner is not liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner, but the purchaser's contract is voidable by the purchaser until the certificate has been provided and for five days thereafter or until conveyance, whichever occurs first.

              Sec. 5. RCW 64.34.445 and 1992 c 220 s 26 are each amended to read as follows:

              (1) A declarant and any dealer warrants that a unit will be in at least as good condition at the earlier of the time of the conveyance or delivery of possession as it was at the time of contracting, reasonable wear and tear and damage by casualty or condemnation excepted.

              (2) A declarant and any dealer impliedly warrants that a unit and the common elements in the condominium are suitable for the ordinary uses of real estate of its type and that any improvements made or contracted for by such declarant or dealer will be:

              (a) Free from defective materials; ((and))

              (b) Constructed in accordance with sound engineering and construction standards((, and));

              (c) Constructed in a workmanlike manner; and

              (d) Constructed in compliance with all laws then applicable to such improvements.

              (3) A declarant and any dealer warrants to a purchaser of a unit that may be used for residential use that an existing use, continuation of which is contemplated by the parties, does not violate applicable law at the earlier of the time of conveyance or delivery of possession.

              (4) Warranties imposed by this section may be excluded or modified as specified in RCW 64.34.450.

              (5) For purposes of this section, improvements made or contracted for by an affiliate of a declarant, as defined in RCW 64.34.020(1), are made or contracted for by the declarant.

              (6) Any conveyance of a unit transfers to the purchaser all of the declarant's implied warranties of quality.

              (7) In a judicial proceeding for breach of any of the obligations arising under this section, the plaintiff must show that the alleged breach has adversely affected or will adversely affect the performance of that portion of the unit or common elements alleged to be in breach. As used in this subsection, an "adverse effect" must be more than technical and must be significant to a reasonable person. To establish an adverse effect, the person alleging the breach is not required to prove that the breach renders the unit or common element uninhabitable or unfit for its intended purpose.

              (8) Proof of breach of any obligation arising under this section is not proof of damages. Damages awarded for a breach of an obligation arising under this section are the cost of repairs. However, if it is established that the cost of such repairs is clearly disproportionate to the loss in market value caused by the breach, then damages shall be limited to the loss in market value.

              Sec. 6. RCW 64.34.450 and 1989 c 43 s 4-113 are each amended to read as follows:

              (1) ((Except as limited by subsection (2) of this section)) For units intended for nonresidential use, implied warranties of quality:

              (a) May be excluded or modified by written agreement of the parties; and

              (b) Are excluded by written expression of disclaimer, such as "as is," "with all faults," or other language which in common understanding calls the buyer's attention to the exclusion of warranties.

              (2) ((With respect to a purchaser of a unit that may be occupied)) For units intended for residential use, no ((general)) disclaimer of implied warranties of quality is effective, ((but)) except that a declarant ((and any)) or dealer may disclaim liability in ((an instrument)) writing, in type that is bold faced, capitalized, underlined, or otherwise set out from surrounding material so as to be conspicuous, and separately signed by the purchaser, for a specified defect or specified failure to comply with applicable law, if: (a) The declarant or dealer knows or has reason to know that the specific defect or failure ((entered into and became a part of the basis of the bargain)) exists at the time of disclosure; (b) the disclaimer specifically describes the defect or failure; and (c) the disclaimer includes a statement as to the effect of the defect or failure.

              (3) A declarant or dealer may offer an express written warranty of quality only if the express written warranty does not reduce protections provided to the purchaser by the implied warranty set forth in RCW 64.34.445.

              Sec. 7. RCW 64.34.452 and 2002 c 323 s 11 are each amended to read as follows:

              (1) A judicial proceeding for breach of any obligations arising under RCW 64.34.443 ((and)), 64.34.445, and 64.34.450 must be commenced within four years after the cause of action accrues: PROVIDED, That the period for commencing an action for a breach accruing pursuant to subsection (2)(b) of this section shall not expire prior to one year after termination of the period of declarant control, if any, under RCW 64.34.308(4). Such periods may not be reduced by either oral or written agreement, or through the use of contractual claims or notice procedures that require the filing or service of any claim or notice prior to the expiration of the period specified in this section.

              (2) Subject to subsection (3) of this section, a cause of action or breach of warranty of quality, regardless of the purchaser's lack of knowledge of the breach, accrues:

              (a) As to a unit, the date the purchaser to whom the warranty is first made enters into possession if a possessory interest was conveyed or the date of acceptance of the instrument of conveyance if a nonpossessory interest was conveyed; and

              (b) As to each common element, at the latest of (i) the date the first unit in the condominium was conveyed to a bona fide purchaser, (ii) the date the common element was completed, or (iii) the date the common element was added to the condominium.

              (3) If a warranty of quality explicitly extends to future performance or duration of any improvement or component of the condominium, the cause of action accrues at the time the breach is discovered or at the end of the period for which the warranty explicitly extends, whichever is earlier.

              (4) If a written notice of claim is served under RCW 64.50.020 within the time prescribed for the filing of an action under this chapter, the statutes of limitation in this chapter and any applicable statutes of repose for construction-related claims are tolled until sixty days after the period of time during which the filing of an action is barred under RCW 64.50.020.

              (5) Nothing in this section affects the time for filing a claim under chapter 64.-- RCW (sections 101 through 2002 of this act).

              NEW SECTION. Sec. 8. (1) A committee is established to study:

              (a) The required use of independent third-party inspections of residential condominiums as a way to reduce the problem of water penetration in residential condominiums; and

              (b) The use of arbitration or other forms of alternative dispute resolution to resolve disputes involving alleged breaches of implied or express warranties under chapter 64.34 RCW.

              (2) The committee consists of the following members who shall be persons with experience and expertise in condominium law or condominium construction:

              (a) A member, who shall be the chair of the committee, to be appointed by the governor;

              (b) Three members to be appointed by the majority leader of the senate; and

              (c) Three members to be appointed by the speaker of the house of representatives.

              (3) The committee shall:

              (a) Examine the problem of water penetration of condominiums and the efficacy of requiring independent third-party inspections of condominiums, including plan inspection and inspection during construction, as a way to reduce the problem of water penetration;

              (b) Examine issues relating to alternative dispute resolution, including but not limited to:

              (i) When and how the decision to use alternative dispute resolution is made;

              (ii) The procedures to be used in an alternative dispute resolution;

              (iii) The nature of the right of appeal from an alternative dispute resolution decision; and

              (iv) The allocation of costs and fees associated with an alternative dispute resolution proceeding or appeal;

              (c) Deliver to the judiciary committees of the senate and house of representatives, not later than December 31, 2004, a report of the findings and conclusions of the committee, and any proposed legislation implementing third-party water penetration inspections or providing for alternative dispute resolution for warranty issues.

              Sec. 9. RCW 64.34.020 and 1992 c 220 s 2 are each amended to read as follows:

              In the declaration and bylaws, unless specifically provided otherwise or the context requires otherwise, and in this chapter:

              (1) "Affiliate ((of a declarant))" means any person who controls, is controlled by, or is under common control with ((a declarant)) the referenced person. A person "controls" ((a declarant)) another person if the person: (a) Is a general partner, officer, director, or employer of the ((declarant)) referenced person; (b) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than twenty percent of the voting interest in the ((declarant)) referenced person; (c) controls in any manner the election of a majority of the directors of the ((declarant)) referenced person; or (d) has contributed more than twenty percent of the capital of the ((declarant)) referenced person. A person "is controlled by" ((a declarant)) another person if the ((declarant)) other person: (i) Is a general partner, officer, director, or employer of the person; (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than twenty percent of the voting interest in the person; (iii) controls in any manner the election of a majority of the directors of the person; or (iv) has contributed more than twenty percent of the capital of the person. Control does not exist if the powers described in this subsection are held solely as security for an obligation and are not exercised.

              (2) "Allocated interests" means the undivided interest in the common elements, the common expense liability, and votes in the association allocated to each unit.

              (3) "Assessment" means all sums chargeable by the association against a unit including, without limitation: (a) Regular and special assessments for common expenses, charges, and fines imposed by the association; (b) interest and late charges on any delinquent account; and (c) costs of collection, including reasonable attorneys' fees, incurred by the association in connection with the collection of a delinquent owner's account.

              (4) "Association" or "unit owners' association" means the unit owners' association organized under RCW 64.34.300.

              (5) "Board of directors" means the body, regardless of name, with primary authority to manage the affairs of the association.

              (6) "Common elements" means all portions of a condominium other than the units.

              (7) "Common expenses" means expenditures made by or financial liabilities of the association, together with any allocations to reserves.

              (8) "Common expense liability" means the liability for common expenses allocated to each unit pursuant to RCW 64.34.224.

              (9) "Condominium" means real property, portions of which are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of those portions. Real property is not a condominium unless the undivided interests in the common elements are vested in the unit owners, and unless a declaration and a survey map and plans have been recorded pursuant to this chapter.

              (10) "Conversion condominium" means a condominium (a) that at any time before creation of the condominium was lawfully occupied wholly or partially by a tenant or subtenant for residential purposes pursuant to a rental agreement, oral or written, express or implied, for which the tenant or subtenant had not received the notice described in (b) of this subsection; or (b) that, at any time within twelve months before the conveyance of, or acceptance of an agreement to convey, any unit therein other than to a declarant or any affiliate of a declarant, was lawfully occupied wholly or partially by a residential tenant of a declarant or an affiliate of a declarant and such tenant was not notified in writing, prior to lawfully occupying a unit or executing a rental agreement, whichever event first occurs, that the unit was part of a condominium and subject to sale. "Conversion condominium" shall not include a condominium in which, before July 1, 1990, any unit therein had been conveyed or been made subject to an agreement to convey to any transferee other than a declarant or an affiliate of a declarant.

              (11) "Conveyance" means any transfer of the ownership of a unit, including a transfer by deed or by real estate contract and, with respect to a unit in a leasehold condominium, a transfer by lease or assignment thereof, but shall not include a transfer solely for security.

              (12) "Dealer" means a person who, together with such person's affiliates, owns or has a right to acquire either six or more units in a condominium or fifty percent or more of the units in a condominium containing more than two units.

              (13) "Declarant" means ((any person or group of persons acting in concert who)):

              (a) Any person who executes as declarant a declaration as defined in subsection (15) of this section((,)); or

              (b) ((reserves or succeeds to any special declarant right under)) Any person who reserves any special declarant right in the declaration; or

              (c) Any person who exercises special declarant rights or to whom special declarant rights are transferred; or

              (d) Any person who is the owner of a fee interest in the real property which is subjected to the declaration at the time of the recording of an instrument pursuant to RCW 64.34.316 and who directly or through one or more affiliates is materially involved in the construction, marketing, or sale of units in the condominium created by the recording of the instrument.

              (14) "Declarant control" means the right of the declarant or persons designated by the declarant to appoint and remove officers and members of the board of directors, or to veto or approve a proposed action of the board or association, pursuant to RCW 64.34.308 (4) or (5).

              (15) "Declaration" means the document, however denominated, that creates a condominium by setting forth the information required by RCW 64.34.216 and any amendments to that document.

              (16) "Development rights" means any right or combination of rights reserved by a declarant in the declaration to: (a) Add real property or improvements to a condominium; (b) create units, common elements, or limited common elements within real property included or added to a condominium; (c) subdivide units or convert units into common elements; (d) withdraw real property from a condominium; or (e) reallocate limited common elements with respect to units that have not been conveyed by the declarant.

              (17) "Dispose" or "disposition" means a voluntary transfer or conveyance to a purchaser or lessee of any legal or equitable interest in a unit, but does not include the transfer or release of a security interest.

              (18) "Eligible mortgagee" means the holder of a mortgage on a unit that has filed with the secretary of the association a written request that it be given copies of notices of any action by the association that requires the consent of mortgagees.

              (19) "Foreclosure" means a forfeiture or judicial or nonjudicial foreclosure of a mortgage or a deed in lieu thereof.

              (20) "Identifying number" means the designation of each unit in a condominium.

              (21) "Leasehold condominium" means a condominium in which all or a portion of the real property is subject to a lease, the expiration or termination of which will terminate the condominium or reduce its size.

              (22) "Limited common element" means a portion of the common elements allocated by the declaration or by operation of RCW 64.34.204 (2) or (4) for the exclusive use of one or more but fewer than all of the units.

              (23) "Master association" means an organization described in RCW 64.34.276, whether or not it is also an association described in RCW 64.34.300.

              (24) "Mortgage" means a mortgage, deed of trust or real estate contract.

              (25) "Person" means a natural person, corporation, partnership, limited partnership, trust, governmental subdivision or agency, or other legal entity.

              (26) "Purchaser" means any person, other than a declarant or a dealer, who by means of a disposition acquires a legal or equitable interest in a unit other than (a) a leasehold interest, including renewal options, of less than twenty years at the time of creation of the unit, or (b) as security for an obligation.

              (27) "Real property" means any fee, leasehold or other estate or interest in, over, or under land, including structures, fixtures, and other improvements thereon and easements, rights and interests appurtenant thereto which by custom, usage, or law pass with a conveyance of land although not described in the contract of sale or instrument of conveyance. "Real property" includes parcels, with or without upper or lower boundaries, and spaces that may be filled with air or water.

              (28) "Residential purposes" means use for dwelling or recreational purposes, or both.

              (29) "Special declarant rights" means rights reserved for the benefit of a declarant to: (a) Complete improvements indicated on survey maps and plans filed with the declaration under RCW 64.34.232; (b) exercise any development right under RCW 64.34.236; (c) maintain sales offices, management offices, signs advertising the condominium, and models under RCW 64.34.256; (d) use easements through the common elements for the purpose of making improvements within the condominium or within real property which may be added to the condominium under RCW 64.34.260; (e) make the condominium part of a larger condominium or a development under RCW 64.34.280; (f) make the condominium subject to a master association under RCW 64.34.276; or (g) appoint or remove any officer of the association or any master association or any member of the board of directors, or to veto or approve a proposed action of the board or association, during any period of declarant control under RCW 64.34.308(4).

              (30) "Timeshare" shall have the meaning specified in the timeshare act, RCW 64.36.010(11).

              (31) "Unit" means a physical portion of the condominium designated for separate ownership, the boundaries of which are described pursuant to RCW 64.34.216(1)(d). "Separate ownership" includes leasing a unit in a leasehold condominium under a lease that expires contemporaneously with any lease, the expiration or termination of which will remove the unit from the condominium.

              (32) "Unit owner" means a declarant or other person who owns a unit or leases a unit in a leasehold condominium under a lease that expires simultaneously with any lease, the expiration or termination of which will remove the unit from the condominium, but does not include a person who has an interest in a unit solely as security for an obligation. "Unit owner" means the vendee, not the vendor, of a unit under a real estate contract.

              Sec. 10. RCW 64.34.312 and 1989 c 43 s 3-104 are each amended to read as follows:

              (1) Within sixty days after the termination of the period of declarant control provided in RCW 64.34.308(4) or, in the absence of such period, within sixty days after the first conveyance of a unit in the condominium, the declarant shall deliver to the association all property of the unit owners and of the association held or controlled by the declarant including, but not limited to:

              (a) The original or a photocopy of the recorded declaration and each amendment to the declaration;

              (b) The certificate of incorporation and a copy or duplicate original of the articles of incorporation of the association as filed with the secretary of state;

              (c) The bylaws of the association;

              (d) The minute books, including all minutes, and other books and records of the association;

              (e) Any rules and regulations that have been adopted;

              (f) Resignations of officers and members of the board who are required to resign because the declarant is required to relinquish control of the association;

              (g) The financial records, including canceled checks, bank statements, and financial statements of the association, and source documents from the time of incorporation of the association through the date of transfer of control to the unit owners;

              (h) Association funds or the control of the funds of the association;

              (i) All tangible personal property of the association, represented by the declarant to be the property of the association or ostensibly the property of the association, and an inventory of the property;

              (j) Except for alterations to a unit done by a unit owner other than the declarant, a copy of the declarant's plans and specifications utilized in the construction or remodeling of the condominium, with a certificate of the declarant or a licensed architect or engineer that the plans and specifications represent, to the best of their knowledge and belief, the actual plans and specifications utilized by the declarant in the construction or remodeling of the condominium;

              (k) Insurance policies or copies thereof for the condominium and association;

              (l) Copies of any certificates of occupancy that may have been issued for the condominium;

              (m) Any other permits issued by governmental bodies applicable to the condominium in force or issued within one year before the date of transfer of control to the unit owners;

              (n) All written warranties that are still in effect for the common elements, or any other areas or facilities which the association has the responsibility to maintain and repair, from the contractor, subcontractors, suppliers, and manufacturers and all owners' manuals or instructions furnished to the declarant with respect to installed equipment or building systems;

              (o) A roster of unit owners and eligible mortgagees and their addresses and telephone numbers, if known, as shown on the declarant's records and the date of closing of the first sale of each unit sold by the declarant;

              (p) Any leases of the common elements or areas and other leases to which the association is a party;

              (q) Any employment contracts or service contracts in which the association is one of the contracting parties or service contracts in which the association or the unit owners have an obligation or a responsibility, directly or indirectly, to pay some or all of the fee or charge of the person performing the service; ((and))

              (r) A copy of any qualified warranty issued to the association as provided for in section 1001 of this act; and

              s All other contracts to which the association is a party.

              (2) Upon the transfer of control to the unit owners, the records of the association shall be audited as of the date of transfer by an independent certified public accountant in accordance with generally accepted auditing standards unless the unit owners, other than the declarant, by two-thirds vote elect to waive the audit. The cost of the audit shall be a common expense unless otherwise provided in the declaration. The accountant performing the audit shall examine supporting documents and records, including the cash disbursements and related paid invoices, to determine if expenditures were for association purposes and the billings, cash receipts, and related records to determine if the declarant was charged for and paid the proper amount of assessments.

              Sec. 11. RCW 64.34.410 and 2002 c 323 s 10 are each amended to read as follows:

              (1) A public offering statement shall contain the following information:

              (a) The name and address of the condominium;

              (b) The name and address of the declarant;

              (c) The name and address of the management company, if any;

              (d) The relationship of the management company to the declarant, if any;

              (e) A list of up to the five most recent condominium projects completed by the declarant or an affiliate of the declarant within the past five years, including the names of the condominiums, their addresses, and the number of existing units in each. For the purpose of this section, a condominium is "completed" when any one unit therein has been rented or sold;

              (f) The nature of the interest being offered for sale;

              (g) A brief description of the permitted uses and use restrictions pertaining to the units and the common elements;

              (h) A brief description of the restrictions, if any, on the renting or leasing of units by the declarant or other unit owners, together with the rights, if any, of the declarant to rent or lease at least a majority of units;

              (i) The number of existing units in the condominium and the maximum number of units that may be added to the condominium;

              (j) A list of the principal common amenities in the condominium which materially affect the value of the condominium and those that will or may be added to the condominium;

              (k) A list of the limited common elements assigned to the units being offered for sale;

              (l) The identification of any real property not in the condominium, the owner of which has access to any of the common elements, and a description of the terms of such access;

              (m) The identification of any real property not in the condominium to which unit owners have access and a description of the terms of such access;

              (n) The status of construction of the units and common elements, including estimated dates of completion if not completed;

              (o) The estimated current common expense liability for the units being offered;

              (p) An estimate of any payment with respect to the common expense liability for the units being offered which will be due at closing;

              (q) The estimated current amount and purpose of any fees not included in the common expenses and charged by the declarant or the association for the use of any of the common elements;

              (r) Any assessments which have been agreed to or are known to the declarant and which, if not paid, may constitute a lien against any units or common elements in favor of any governmental agency;

              s The identification of any parts of the condominium, other than the units, which any individual owner will have the responsibility for maintaining;

              (t) If the condominium involves a conversion condominium, the information required by RCW 64.34.415;

              (u) Whether timesharing is restricted or prohibited, and if restricted, a general description of such restrictions;

              (v) A list of all development rights reserved to the declarant and all special declarant rights reserved to the declarant, together with the dates such rights must terminate, and a copy of or reference by recording number to any recorded transfer of a special declarant right;

              (w) A description of any material differences in terms of furnishings, fixtures, finishes, and equipment between any model unit available to the purchaser at the time the agreement for sale is executed and the unit being offered;

              (x) Any liens on real property to be conveyed to the association required to be disclosed pursuant to RCW 64.34.435(2)(b);

              (y) A list of any physical hazards known to the declarant which particularly affect the condominium or the immediate vicinity in which the condominium is located and which are not readily ascertainable by the purchaser;

              (z) A brief description of any construction warranties to be provided to the purchaser;

              (aa) Any building code violation citations received by the declarant in connection with the condominium which have not been corrected;

              (bb) A statement of any unsatisfied judgments or pending suits against the association, a statement of the status of any pending suits material to the condominium of which the declarant has actual knowledge, and a statement of any litigation brought by an owners' association, unit owner, or governmental entity in which the declarant or any affiliate of the declarant has been a defendant, arising out of the construction, sale, or administration of any condominium within the previous five years, together with the results thereof, if known;

              (cc) Any rights of first refusal to lease or purchase any unit or any of the common elements;

              (dd) The extent to which the insurance provided by the association covers furnishings, fixtures, and equipment located in the unit;

              (ee) A notice which describes a purchaser's right to cancel the purchase agreement or extend the closing under RCW 64.34.420, including applicable time frames and procedures;

              (ff) Any reports or statements required by RCW 64.34.415 or 64.34.440(6)(a). RCW 64.34.415 shall apply to the public offering statement of a condominium in connection with which a final certificate of occupancy was issued more than sixty calendar months prior to the preparation of the public offering statement whether or not the condominium is a conversion condominium as defined in RCW 64.34.020(10);

              (gg) A list of the documents which the prospective purchaser is entitled to receive from the declarant before the rescission period commences;

              (hh) A notice which states: A purchaser may not rely on any representation or express warranty unless it is contained in the public offering statement or made in writing signed by the declarant or by any person identified in the public offering statement as the declarant's agent;

              (ii) A notice which states: This public offering statement is only a summary of some of the significant aspects of purchasing a unit in this condominium and the condominium documents are complex, contain other important information, and create binding legal obligations. You should consider seeking the assistance of legal counsel;

              (jj) Any other information and cross-references which the declarant believes will be helpful in describing the condominium to the recipients of the public offering statement, all of which may be included or not included at the option of the declarant;

              (kk) A notice that addresses compliance or noncompliance with the housing for older persons act of 1995, P.L. 104-76, as enacted on December 28, 1995; ((and))

              (ll) A notice that is substantially in the form required by RCW 64.50.050; and

              (mm) A statement, as required by section 301 of this act, as to whether the units or common elements of the condominium are covered by a qualified warranty, and a history of claims under any such warranty.

              (2) The public offering statement shall include copies of each of the following documents: The declaration, the survey map and plans, the articles of incorporation of the association, bylaws of the association, rules and regulations, if any, current or proposed budget for the association, and the balance sheet of the association current within ninety days if assessments have been collected for ninety days or more.

              If any of the foregoing documents listed in this subsection are not available because they have not been executed, adopted, or recorded, drafts of such documents shall be provided with the public offering statement, and, before closing the sale of a unit, the purchaser shall be given copies of any material changes between the draft of the proposed documents and the final documents.

              (3) The disclosures required by subsection (1)(g), (k), s, (u), (v), and (cc) of this section shall also contain a reference to specific sections in the condominium documents which further explain the information disclosed.

              (4) The disclosures required by subsection (1)(ee), (hh), (ii), and (ll) of this section shall be located at the top of the first page of the public offering statement and be typed or printed in ten-point bold face type size.

              (5) A declarant shall promptly amend the public offering statement to reflect any material change in the information required by this section.

              NEW SECTION. Sec. 12. Sections 5 and 6 of this act apply only to condominiums created by declarations recorded on or after July 1, 2004.

              NEW SECTION. Sec. 13. 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. 14. Sections 1 through 13 of this act take effect July 1, 2004.

ARTICLE 1

GENERAL PROVISIONS

              NEW SECTION. Sec. 101. DEFINITIONS. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

              (1) "Affiliate" has the meaning in RCW 64.34.020.

              (2) "Association" has the meaning in RCW 64.34.020.

              (3) "Building envelope" means the assemblies, components, and materials of a building that are intended to separate and protect the interior space of the building from the adverse effects of exterior climatic conditions.

              (4) "Common element" has the meaning in RCW 64.34.020.

              (5) "Condominium" has the meaning in RCW 64.34.020.

              (6) "Construction professional" has the meaning in RCW 64.50.010.

              (7) "Conversion condominium" has the meaning in RCW 64.34.020.

              (8) "Declarant" has the meaning in RCW 64.34.020.

              (9) "Declarant control" has the meaning in RCW 64.34.020.

              (10) "Defect" means any aspect of a condominium unit or common element which constitutes a breach of the implied warranties set forth in RCW 64.34.445.

              (11) "Limited common element" has the meaning in RCW 64.34.020.

              (12) "Material" means substantive, not simply formal; significant to a reasonable person; not trivial or insignificant. When used with respect to a particular construction defect, "material" does not require that the construction defect render the unit or common element unfit for its intended purpose or uninhabitable.

              (13) "Mediation" means a collaborative process in which two or more parties meet and attempt, with the assistance of a mediator, to resolve issues in dispute between them.

              (14) "Mediation session" means a meeting between two or more parties to a dispute during which they are engaged in mediation.

              (15) "Mediator" means a neutral and impartial facilitator with no decision-making power who assists parties in negotiating a mutually acceptable settlement of issues in dispute between them.

              (16) "Person" has the meaning in RCW 64.34.020.

              (17) "Public offering statement" has the meaning in RCW 64.34.410.

              (18) "Qualified insurer" means an entity that holds a certificate of authority under RCW 48.05.030, or an eligible insurer under chapter 48.15 RCW.

              (19) "Qualified warranty" means an insurance policy issued by a qualified insurer that complies with the requirements of this chapter. A qualified warranty includes coverage for repair of physical damage caused by the defects covered by the qualified warranty, except to the extent of any exclusions and limitations under this chapter.

              (20) "Resale certificate" means the statement to be delivered by the association under RCW 64.34.425.

              (21) "Transition date" means the date on which the declarant is required to deliver to the association the property of the association under RCW 64.34.312.

              (22) "Unit" has the meaning in RCW 64.34.020.

              (23) "Unit owner" has the meaning in RCW 64.34.020.

ARTICLE 2

EXCLUSIVE REMEDY AND PROCEDURE

IN CASES WHERE A QUALIFIED WARRANTY IS PROVIDED

              NEW SECTION. Sec. 201. No declarant, affiliate of a declarant, or construction professional is liable to a unit owner or an association for damages awarded for repair of construction defects and resulting physical damage, and chapter 64.50 RCW shall not apply if: (1) Every unit is the subject of a qualified warranty; and (2) the association has been issued a qualified warranty with respect to the common elements. If a construction professional agrees on terms satisfactory to the qualified insurer to partially or fully indemnify the qualified insurer with respect to a defect caused by the construction professional, the liability of the construction professional for the defect and resulting physical damage caused by him or her shall not exceed damages recoverable under the terms of the qualified warranty for the defect. Any indemnity claim by the qualified insurer shall be by separate action or arbitration, and no unit owner or association shall be joined therein. A qualified warranty may also be provided in the case of improvements made or contracted for by a declarant as part of a conversion condominium, and in such case, declarant's liability with respect to such improvements shall be limited as set forth in this section.

ARTICLE 3

DISCLOSURE

              NEW SECTION. Sec. 301. (1) Every public offering statement and resale certificate shall affirmatively state whether or not the unit and/or the common elements are covered by a qualified warranty, and shall provide to the best knowledge of the person preparing the public offering statement or resale certificate a history of claims under the warranty.

              (2) The history of claims must include, for each claim, not less than the following information for the unit and/or the common elements, as applicable, to the best knowledge of the person providing the information:

              (a) The type of claim that was made;

              (b) The resolution of the claim;

              (c) The type of repair performed;

              (d) The date of the repair;

              (e) The cost of the repair; and

              (f) The name of the person or entity who performed the repair.

ARTICLE 4

MINIMUM COVERAGE STANDARDS FOR QUALIFIED WARRANTIES

              NEW SECTION. Sec. 401. TWO-YEAR MATERIALS AND LABOR WARRANTY. (1) The minimum coverage for the two-year materials and labor warranty is:

              (a) In the first twelve months, for other than the common elements, (i) coverage for any defect in materials and labor; and (ii) subject to subsection (2) of this section, coverage for a violation of the building code;

              (b) In the first fifteen months, for the common elements, (i) coverage for any defect in materials and labor; and (ii) subject to subsection (2) of this section, coverage for a violation of the building code;

              (c) In the first twenty-four months, (i) coverage for any defect in materials and labor supplied for the electrical, plumbing, heating, ventilation, and air conditioning delivery and distribution systems; (ii) coverage for any defect in materials and labor supplied for the exterior cladding, caulking, windows, and doors that may lead to detachment or material damage to the unit or common elements; (iii) coverage for any defect in materials and labor which renders the unit unfit to live in; and (iv) subject to subsection (2) of this section, coverage for a violation of the building code.

              (2) Noncompliance with the building code is considered a defect covered by a qualified warranty if the noncompliance:

              (a) Constitutes an unreasonable health or safety risk; or

              (b) Has resulted in, or is likely to result in, material damage to the unit or common elements.

              NEW SECTION. Sec. 402. FIVE-YEAR BUILDING ENVELOPE WARRANTY. The minimum coverage for the building envelope warranty is five years for defects in the building envelope of a condominium, including a defect which permits unintended water penetration so that it causes, or is likely to cause, material damage to the unit or common elements.

              NEW SECTION. Sec. 403. TEN-YEAR STRUCTURAL DEFECTS WARRANTY. The minimum coverage for the structural defects warranty is ten years for:

              (1) Any defect in materials and labor that results in the failure of a load-bearing part of the condominium; and

              (2) Any defect which causes structural damage that materially and adversely affects the use of the condominium for residential occupancy.

              NEW SECTION. Sec. 404. BEGINNING DATES FOR WARRANTY COVERAGE. (1) For the unit, the beginning date of the qualified warranty coverage is the earlier of:

              (a) Actual occupancy of the unit; or

              (b) Transfer of legal title to the unit.

              (2) For the common elements, the beginning date of a qualified warranty is the date a temporary or final certificate of occupancy is issued for the common elements in each separate multiunit building, comprised by the condominium.

              NEW SECTION. Sec. 405. BEGINNING DATES FOR SPECIAL CASES; DECLARANT CONTROL. (1) If an unsold unit is occupied as a rental unit, the qualified warranty beginning date for such unit is the date the unit is first occupied.

              (2) If the declarant subsequently offers to sell a unit which is rented, the declarant must disclose, in writing, to each prospective purchaser, the date on which the qualified warranty expires.

              (3) If the declarant retains any declarant control over the association on the date that is fourteen full calendar months following the month in which the beginning date for common element warranty coverage commences, the declarant shall within thirty days thereafter cause an election to be held in which the declarant may not vote, for the purpose of electing one or more board members who are empowered to make warranty claims. If at such time, one or more independent board members hold office, no additional election need be held, and such independent board members are empowered to make warranty claims. The declarant shall inform all independent board members of their right to make warranty claims at no later than sixteen full calendar months following the beginning date of the common element warranty.

              NEW SECTION. Sec. 406. LIVING EXPENSE ALLOWANCE. (1) If repairs are required under the qualified warranty and damage to the unit, or the extent of the repairs renders the unit uninhabitable, the qualified warranty must cover reasonable living expenses incurred by the owner to live elsewhere in an amount commensurate with the nature of the unit.

              (2) If a qualified insurer establishes a maximum amount per day for claims for living expenses, the limit must be the greater of one hundred dollars per day or a reasonable amount commensurate with the nature of the unit for the complete reimbursement of the actual accommodation expenses incurred by the owner at a hotel, motel, or other rental accommodation up to the day the unit is ready for occupancy, subject to the owner receiving twenty-four hours' advance notice.

              NEW SECTION. Sec. 407. WARRANTY ON REPAIRS AND REPLACEMENTS. (1) All repairs and replacements made under a qualified warranty must be warranted by the qualified warranty against defects in materials and labor until the later of:

              (a) The first anniversary of the date of completion of the repair or replacement; or

              (b) The expiration of the applicable qualified warranty coverage.

              (2) All repairs and replacements made under a qualified warranty must be completed in a reasonable manner using materials and labor conforming to the building code and industry standards.

ARTICLE 5

PERMITTED TERMS FOR QUALIFIED WARRANTIES

              NEW SECTION. Sec. 501. A qualified insurer may include any of the following provisions in a qualified warranty:

              (1) If the qualified insurer makes a payment or assumes liability for any payment or repair under a qualified warranty, the owner and association must fully support and assist the qualified insurer in pursuing any rights that the qualified insurer may have against the declarant, and any construction professional that has contractual or common law obligations to the declarant, whether such rights arose by contract, subrogation, or otherwise.

              (2) Warranties or representations made by a declarant which are in addition to the warranties set forth in this chapter are not binding on the qualified insurer unless and to the extent specifically provided in the text of the warranty; and disclaimers of specific defects made by agreement between the declarant and the unit purchaser under RCW 64.34.450 act as an exclusion of the specified defect from the warranty coverage.

              (3) An owner and the association must permit the qualified insurer or declarant, or both, to enter the unit at reasonable times, after reasonable notice to the owner and the association:

              (a) To monitor the unit or its components;

              (b) To inspect for required maintenance;

              (c) To investigate complaints or claims; or

              (d) To undertake repairs under the qualified warranty.

              If any reports are produced as a result of any of the activities referred to in (a) through (d) of this subsection, the reports must be provided to the owner and the association.

              (4) An owner and the association must provide to the qualified insurer all information and documentation that the owner and the association have available, as reasonably required by the qualified insurer to investigate a claim or maintenance requirement, or to undertake repairs under the qualified warranty.

              (5) To the extent any damage to a unit is caused or made worse by the unreasonable refusal of the association, or an owner or occupant to permit the qualified insurer or declarant access to the unit for the reasons in subsection (3) of this section, or to provide the information required by subsection (4) of this section, that damage is excluded from the qualified warranty.

              (6) In any claim under a qualified warranty issued to the association, the association shall have the sole right to prosecute and settle any claim with respect to the common elements.

ARTICLE 6

PERMITTED EXCLUSIONS FROM QUALIFIED WARRANTIES--GENERAL

              NEW SECTION. Sec. 601. (1) A qualified insurer may exclude from a qualified warranty:

              (a) Landscaping, both hard and soft, including plants, fencing, detached patios, planters not forming a part of the building envelope, gazebos, and similar structures;

              (b) Any commercial use area and any construction associated with a commercial use area;

              (c) Roads, curbs, and lanes;

              (d) Subject to subsection (2) of this section, site grading and surface drainage except as required by the building code;

              (e) Municipal services operation, including sanitary and storm sewer;

              (f) Septic tanks or septic fields;

              (g) The quality or quantity of water, from either a piped municipal water supply or a well;

              (h) A water well, but excluding equipment installed for the operation of a water well used exclusively for a unit, which equipment is part of the plumbing system for that unit for the purposes of the qualified warranty.

              (2) The exclusions permitted by subsection (1) of this section do not include any of the following:

              (a) A driveway or walkway;

              (b) Recreational and amenity facilities situated in, or included as the common property of, a unit;

              (c) A parking structure in a multiunit building;

              (d) A retaining wall that:

              (i) An authority with jurisdiction requires to be designed by a professional engineer; or

              (ii) Is reasonably required for the direct support of, or retaining soil away from, a unit, driveway, or walkway.

ARTICLE 7

PERMITTED EXCLUSIONS--DEFECTS

              NEW SECTION. Sec. 701. A qualified insurer may exclude any or all of the following items from a qualified warranty:

              (1) Weathering, normal wear and tear, deterioration, or deflection consistent with normal industry standards;

              (2) Normal shrinkage of materials caused by drying after construction;

              (3) Any loss or damage which arises while a unit is being used primarily or substantially for nonresidential purposes;

              (4) Materials, labor, or design supplied by an owner;

              (5) Any damage to the extent caused or made worse by an owner or third party, including:

              (a) Negligent or improper maintenance or improper operation by anyone other than the declarant or its employees, agents, or subcontractors;

              (b) Failure of anyone, other than the declarant or its employees, agents, or subcontractors, to comply with the warranty requirements of the manufacturers of appliances, equipment, or fixtures;

              (c) Alterations to the unit, including converting nonliving space into living space or converting a unit into two or more units, by anyone other than the declarant or its employees, agents, or subcontractors while undertaking their obligations under the sales contract; and

              (d) Changes to the grading of the ground by anyone other than the declarant or its employees, agents, or subcontractors;

              (6) An owner failing to take timely action to prevent or minimize loss or damage, including failing to give prompt notice to the qualified insurer of a defect or discovered loss, or a potential defect or loss;

              (7) Any damage caused by insects, rodents, or other animals, unless the damage results from noncompliance with the building code by the declarant or its employees, agents, or subcontractors;

              (8) Accidental loss or damage from acts of nature including, but not limited to, fire, explosion, smoke, water escape, glass breakage, windstorm, hail, lightning, falling trees, aircraft, vehicles, flood, earthquake, avalanche, landslide, and changes in the level of the underground water table which are not reasonably foreseeable by the declarant;

              (9) Bodily injury or damage to personal property or real property which is not part of a unit;

              (10) Any defect in, or caused by, materials or work supplied by anyone other than the declarant, an affiliate of a declarant, or their respective contractors, employees, agents, or subcontractors;

              (11) Changes, alterations, or additions made to a unit by anyone after initial occupancy, except those performed by the declarant or its employees, agents, or subcontractors as required by the qualified warranty or under the construction contract or sales agreement;

              (12) Contaminated soil;

              (13) Subsidence of the land around a unit or along utility lines, other than subsidence beneath footings of a unit or under driveways or walkways;

              (14) Diminution in the value of the unit.

ARTICLE 8

MONETARY LIMITS ON QUALIFIED WARRANTY COVERAGE

              NEW SECTION. Sec. 801. (1) A qualified insurer may establish a monetary limit on the amount of the warranty. Any limit must not be less than:

              (a) For a unit, the lesser of (i) the original purchase price paid by the owner, or (ii) one hundred thousand dollars;

              (b) For common elements, the lesser of (i) the total original purchase price for all components of the multiunit building, or (ii) one hundred fifty thousand dollars times the number of units of the condominium.

              (2) When calculating the cost of warranty claims under the standard limits under a qualified warranty, a qualified insurer may include:

              (a) The cost of repairs;

              (b) The cost of any investigation, engineering, and design required for the repairs; and

              (c) The cost of supervision of repairs, including professional review, but excluding legal costs.

              (3) The minimum amounts in subsections (1) and (2) of this section shall be adjusted at the end of each calendar year after the effective date by an amount equal to the percentage change in the consumer price index for all urban consumers, all items, as published from time to time by the United States department of labor. The adjustment does not affect any qualified warranty issued before the adjustment date.

ARTICLE 9

PROHIBITED POLICY PROVISIONS

              NEW SECTION. Sec. 901. (1) A qualified insurer must not include in a qualified warranty any provision that requires an owner or the association:

              (a) To sign a release before repairs are performed under the qualified warranty; or

              (b) To pay a deductible in excess of five hundred dollars for the repair of any defect in a unit covered by the qualified warranty, or in excess of the lesser of five hundred dollars per unit or ten thousand dollars in the aggregate for any defect in the common elements.

              (2) All exclusions must be permitted by this chapter and stated in the qualified warranty.

ARTICLE 10

CONSEQUENCES OF NOT PROVIDING INFORMATION

              NEW SECTION. Sec. 1001. (1) If coverage under a qualified warranty is conditional on an owner undertaking proper maintenance, or if coverage is excluded for damage caused by negligence by the owner or association with respect to maintenance or repair by the owner or association, the conditions or exclusions apply only to maintenance requirements or procedures: (a) Provided to the original owner in the case of the unit warranty, and to the association for the common element warranty with an estimation of the required cost thereof for the common element warranty provided in the budget prepared by the declarant; or (b) that would be obvious to a reasonable and prudent layperson. Recommended maintenance requirements and procedures are sufficient for purposes of this subsection if consistent with knowledge generally available in the construction industry at the time the qualified warranty is issued.

              (2) If an original owner or the association has not been provided with the manufacturer's documentation or warranty information, or both, or with recommended maintenance and repair procedures for any component of a unit, the relevant exclusion does not apply. The common element warranty is included in the written warranty to be provided to the association under RCW 64.34.312.

ARTICLE 11

MANDATORY NOTICE OF EXPIRATION OF WARRANTY

              NEW SECTION. Sec. 1101. (1) A qualified insurer must, as soon as reasonably possible after the beginning date for the qualified warranty, provide an owner and association with a schedule of the expiration dates for coverages under the qualified warranty as applicable to the unit and the common elements, respectively.

              (2) The expiration date schedule for a unit must set out all the required dates on an adhesive label that is a minimum size of four inches by four inches and is suitable for affixing by the owner in a conspicuous location in the unit.

ARTICLE 12

DUTY TO MITIGATE

              NEW SECTION. Sec. 1201. (1) The qualified insurer may require an owner or association to mitigate any damage to a unit or the common elements, including damage caused by defects or water penetration, as set out in the qualified warranty.

              (2) Subject to subsection (3) of this section, for defects covered by the qualified warranty, the duty to mitigate is met through timely notice in writing to the qualified insurer.

              (3) The owner must take all reasonable steps to restrict damage to the unit if the defect requires immediate attention.

              (4) The owner's duty to mitigate survives even if:

              (a) The unit is unoccupied;

              (b) The unit is occupied by someone other than the owner;

              (c) Water penetration does not appear to be causing damage; or

              (d) The owner advises the homeowners' association corporation about the defect.

              (5) If damage to a unit is caused or made worse by the failure of an owner to take reasonable steps to mitigate as set out in this section, the damage may, at the option of the qualified insurer, be excluded from qualified warranty coverage.

ARTICLE 13

NOTICE OF CLAIM

              NEW SECTION. Sec. 1301. (1) Within a reasonable time after the discovery of a defect and before the expiration of the applicable qualified warranty coverage, a claimant must give to the qualified insurer and the declarant written notice in reasonable detail that provides particulars of any specific defects covered by the qualified warranty.

              (2) The qualified insurer may require the notice under subsection (1) of this section to include:

              (a) The qualified warranty number; and

              (b) Copies of any relevant documentation and correspondence between the claimant and the declarant, to the extent any such documentation and correspondence is in the control or possession of the claimant.

ARTICLE 14

HANDLING OF CLAIMS

              NEW SECTION. Sec. 1401. A qualified insurer must, on receipt of a notice of a claim under a qualified warranty, promptly make reasonable attempts to contact the claimant to arrange an evaluation of the claim. Claims shall be handled in accordance with the claims procedures set forth in rules by the insurance commissioner, and as follows:

              (1) The qualified insurer must make all reasonable efforts to avoid delays in responding to a claim under a qualified warranty, evaluating the claim, and scheduling any required repairs.

              (2) If, after evaluating a claim under a qualified warranty, the qualified insurer determines that the claim is not valid, or not covered under the qualified warranty, the qualified insurer must: (a) Notify the claimant of the decision in writing; (b) set out the reasons for the decision; and (c) set out the rights of the parties under the third-party dispute resolution process for the warranty.

              (3) Repairs must be undertaken in a timely manner, with reasonable consideration given to weather conditions and the availability of materials and labor.

              (4) On completing any repairs, the qualified insurer must deliver a copy of the repair specifications to the claimant along with a letter confirming the date the repairs were completed and referencing the repair warranty provided for in section 407 of this act.

ARTICLE 15

MEDIATION OF DISPUTED CLAIMS

              NEW SECTION. Sec. 1501. (1) If a dispute between a qualified insurer and a claimant arising under a qualified warranty cannot be resolved by informal negotiation within a reasonable time, the claimant or qualified insurer may require that the dispute be referred to mediation by delivering written notice to the other to mediate.

              (2) If a party delivers a request to mediate under subsection (1) of this section, the qualified insurer and the party must attend a mediation session in relation to the dispute and may invite to participate in the mediation any other party to the dispute who may be liable.

              (3) Within twenty-one days after the party has delivered a request to mediate under subsection (1) of this section, the parties must, directly or with the assistance of an independent, neutral person or organization, jointly appoint a mutually acceptable mediator.

              (4) If the parties do not jointly appoint a mutually acceptable mediator within the time required by subsection (3) of this section, the party may apply to the superior court of the county where the project is located, which must appoint a mediator taking into account:

              (a) The need for the mediator to be neutral and independent;

              (b) The qualifications of the mediator;

              (c) The mediator's fees;

              (d) The mediator's availability; and

              (e) Any other consideration likely to result in the selection of an impartial, competent, and effective mediator.

              (5) After selecting the mediator under subsection (4) of this section, the superior court must promptly notify the parties in writing of that selection.

              (6) The mediator selected by the superior court is deemed to be appointed by the parties effective the date of the notice sent under subsection (5) of this section.

              (7) The first mediation session must occur within twenty-one days of the appointment of the mediator at the date, time, and place selected by the mediator.

              (8) A party may attend a mediation session by representative if:

              (a) The party is under a legal disability and the representative is that party's guardian ad litem;

              (b) The party is not an individual; or

              (c) The party is a resident of a jurisdiction other than Washington and will not be in Washington at the time of the mediation session.

              (9) A representative who attends a mediation session in the place of a party as permitted by subsection (8) of this section:

              (a) Must be familiar with all relevant facts on which the party, on whose behalf the representative attends, intends to rely; and

              (b) Must have full authority to settle, or have immediate access to a person who has full authority to settle, on behalf of the party on whose behalf the representative attends.

              (10) A party or a representative who attends the mediation session may be accompanied by counsel.

              (11) Any other person may attend a mediation session on consent of all parties or their representatives.

              (12) At least seven days before the first mediation session is to be held, each party must deliver to the mediator a statement briefly setting out:

              (a) The facts on which the party intends to rely; and

              (b) The matters in dispute.

              (13) The mediator must promptly send each party's statement to each of the other parties.

              (14) Before the first mediation session, the parties must enter into a retainer agreement with the mediator which must:

              (a) Disclose the cost of the mediation services; and

              (b) Provide that the cost of the mediation will be paid:

              (i) Equally by the parties; or

              (ii) On any other specified basis agreed by the parties.

              (15) The mediator may conduct the mediation in any manner he or she considers appropriate to assist the parties to reach a resolution that is timely, fair, and cost-effective.

              (16) A person may not disclose, or be compelled to disclose, in any proceeding, oral or written information acquired or an opinion formed, including, without limitation, any offer or admission made in anticipation of or during a mediation session.

              (17) Nothing in subsection (16) of this section precludes a party from introducing into evidence in a proceeding any information or records produced in the course of the mediation that are otherwise producible or compellable in those proceedings.

              (18) A mediation session is concluded when:

              (a) All issues are resolved;

              (b) The mediator determines that the process will not be productive and so advises the parties or their representatives; or

              (c) The mediation session is completed and there is no agreement to continue.

              (19) If the mediation resolves some but not all issues, the mediator may, at the request of all parties, complete a report setting out any agreements made as a result of the mediation, including, without limitation, any agreements made by the parties on any of the following:

              (a) Facts;

              (b) Issues; and

              (c) Future procedural steps.

ARTICLE 16

ARBITRATION

              NEW SECTION. Sec. 1601. A qualified warranty may include mandatory binding arbitration of all disputes arising out of or in connection with a qualified warranty. The provision may provide that all claims for a single condominium be heard by the same arbitrator, but shall not permit the joinder or consolidation of any other person or entity. The arbitration shall comply with the following minimum procedural standards:

              (1) Any demand for arbitration shall be delivered by certified mail return receipt requested, and by ordinary first class mail. The party initiating the arbitration shall address the notice to the address last known to the initiating party in the exercise of reasonable diligence, and also, for any entity which is required to have a registered agent in the state of Washington, to the address of the registered agent. Demand for arbitration is deemed effective three days after the date deposited in the mail;

              (2) All disputes shall be heard by one qualified arbitrator, unless the parties agree to use three arbitrators. If three arbitrators are used, one shall be appointed by each of the disputing parties and the first two arbitrators shall appoint the third, who will chair the panel. The parties shall select the identity and number of the arbitrator or arbitrators after the demand for arbitration is made. If, within thirty days after the effective date of the demand for arbitration, the parties fail to agree on an arbitrator or the agreed number of arbitrators fail to be appointed, then an arbitrator or arbitrators shall be appointed under RCW 7.04.050 by the presiding judge of the superior court of the county in which the condominium is located;

              (3) In any arbitration, at least one arbitrator must be a lawyer or retired judge. Any additional arbitrator must be either a lawyer or retired judge or a person who has experience with construction and engineering standards and practices, written construction warranties, or construction dispute resolution. No person may serve as an arbitrator in any arbitration in which that person has any past or present financial or personal interest;

              (4) The arbitration hearing must be conducted in a manner that permits full, fair, and expeditious presentation of the case by both parties. The arbitrator is bound by the law of Washington state. Parties may be, but are not required to be, represented by attorneys. The arbitrator may permit discovery to ensure a fair hearing, but may limit the scope or manner of discovery for good cause to avoid excessive delay and costs to the parties. The parties and the arbitrator shall use all reasonable efforts to complete the arbitration within six months of the effective date of the demand for arbitration or, when applicable, the service of the list of defects in accordance with RCW 64.50.030;

              (5) Except as otherwise set forth in this section, arbitration shall be conducted under chapter 7.04 RCW, unless the parties elect to use the construction industry arbitration rules of the American arbitration association, which are permitted to the extent not inconsistent with this section. The expenses of witnesses including expert witnesses shall be paid by the party producing the witnesses. All other expenses of arbitration shall be borne equally by the parties, unless all parties agree otherwise or unless the arbitrator awards expenses or any part thereof to any specified party or parties. The parties shall pay the fees of the arbitrator as and when specified by the arbitrator;

              (6) Demand for arbitration given pursuant to subsection (1) of this section commences a judicial proceeding for purposes of RCW 64.34.452;

              (7) The arbitration decision shall be in writing and must set forth findings of fact and conclusions of law that support the decision.

ARTICLE 17

ATTORNEYS' FEES

              NEW SECTION. Sec. 1701. In any judicial proceeding or arbitration brought to enforce the terms of a qualified warranty, the court or arbitrator may award reasonable attorneys' fees to the substantially prevailing party. In no event may such fees exceed the reasonable hourly value of the attorney's work.

ARTICLE 18

TRANSFER

              NEW SECTION. Sec. 1801. (1) A qualified warranty pertains solely to the unit and common elements for which it provides coverage and no notice to the qualified insurer is required on a change of ownership.

              (2) All of the applicable unused benefits under a qualified warranty with respect to a unit are automatically transferred to any subsequent owner on a change of ownership.

ARTICLE 19

ACCEPTANCE OF DECLARANT FOR QUALIFIED WARRANTY

              NEW SECTION. Sec. 1901. (1) No insurer is bound to offer a qualified warranty to any person. Except as specifically set forth in this section, the terms of any qualified warranty are set in the sole discretion of the qualified insurer. Without limiting the generality of this subsection, a qualified insurer may make inquiries about the applicant as follows:

              (a) Does the applicant have the financial resources to undertake the construction of the number of units being proposed by the applicant's business plan for the following twelve months;

              (b) Does the applicant and its directors, officers, employees, and consultants possess the necessary technical expertise to adequately perform their individual functions with respect to their proposed role in the construction and sale of units;

              (c) Does the applicant and its directors and officers have sufficient experience in business management to properly manage the unit construction process;

              (d) Does the applicant and its directors, officers, and employees have sufficient practical experience to undertake the proposed unit construction;

              (e) Does the past conduct of the applicant and its directors, officers, employees, and consultants provide a reasonable indication of good business practices, and reasonable grounds for belief that its undertakings will be carried on in accordance with all legal requirements; and

              (f) Is the applicant reasonably able to provide, or to cause to be provided, after-sale customer service for the units to be constructed.

              (2) A qualified insurer may charge a fee to make the inquiries permitted by subsection (1) of this section.

              (3) Before approving a qualified warranty for a condominium, a qualified insurer may make such inquiries and impose such conditions as it deems appropriate in its sole discretion, including without limitation the following:

              (a) To determine if the applicant has the necessary capitalization or financing in place, including any reasonable contingency reserves, to undertake construction of the proposed unit;

              (b) To determine if the applicant or, in the case of a corporation, its directors, officers, employees, and consultants possess reasonable technical expertise to construct the proposed unit, including specific technical knowledge or expertise in any building systems, construction methods, products, treatments, technologies, and testing and inspection methods proposed to be employed;

              (c) To determine if the applicant or, in the case of a corporation, its directors, officers, employees, and consultants have sufficient practical experience in the specific types of construction to undertake construction of the proposed unit;

              (d) To determine if the applicant has sufficient personnel and other resources to adequately undertake the construction of the proposed unit in addition to other units which the applicant may have under construction or is currently marketing;

              (e) To determine if:

              (i) The applicant is proposing to engage a general contractor to undertake all or a significant portion of the construction of the proposed unit; and

              (ii) The general contractor meets the criteria set out in this section;

              (f) Requiring that a declarant provide security in a form suitable to the qualified insurer;

              (g) Establishing or requiring compliance with specific construction standards for the unit;

              (h) Restricting the applicant from constructing some types of units or using some types of construction or systems;

              (i) Requiring the use of specific types of systems, consultants, or personnel for the construction;

              (j) Requiring an independent review of the unit building plans or consultants' reports or any part thereof;

              (k) Requiring third-party verification or certification of the construction of the unit or any part thereof;

              (l) Providing for inspection of the unit or any part thereof during construction;

              (m) Requiring ongoing monitoring of the unit, or one or more of its components, following completion of construction;

              (n) Requiring that the declarant or any of the design professionals, engineering professionals, consultants, general contractors, or subcontractors maintain minimum levels of insurance, bonding, or other security naming the potential owners and qualified insurer as loss payees or beneficiaries of the insurance, bonding, or security to the extent possible;

              (o) Requiring that the declarant provide a list of all design professionals and other consultants who are involved in the design or construction inspection, or both, of the unit;

              (p) Requiring that the declarant provide a list of trades employed in the construction of the unit, and requiring evidence of their current trade's certification, if applicable.

ARTICLE 20

MISCELLANEOUS

              NEW SECTION. Sec. 2001. All qualified warrantees shall be deemed to be "insurance" for purposes of RCW 48.01.040, and shall be regulated as such.

              NEW SECTION. Sec. 2002. Captions and part headings used in this act are not any part of the law.

              NEW SECTION. Sec. 2003. Sections 101 through 2002 of this act constitute a new chapter in Title 64 RCW."

              Correct the title.

             Representatives Lantz and Tom spoke in favor of the adoption of the amendment.

             The amendment was adopted.

             There being no objection, the rules were suspended, the second reading considered the third and the bill, as amended by the House, was placed on final passage.

             Representatives Lantz and Tom spoke in favor of passage of the bill.

             The Speaker stated the question before the House to be the final passage of Second Engrossed Substitute Senate Bill No. 5536, as amended by the House.

ROLL CALL

             The Clerk called the roll on the final passage of Second Engrossed Substitute Senate Bill No. 5536, as amended by the House, and the bill passed the House by the following vote: Yeas - 97, Nays - 0, Absent - 0, Excused - 1.

             Voting yea: Representatives Ahern, Alexander, Anderson, Armstrong, Bailey, Benson, Blake, Boldt, Buck, Bush, Cairnes, Campbell, Carrell, Chandler, Chase, Clements, Clibborn, Cody, Condotta, Conway, Cooper, Cox, Crouse, Darneille, DeBolt, Delvin, Dickerson, Dunshee, Eickmeyer, Ericksen, Flannigan, Fromhold, Grant, Haigh, Hankins, Hatfield, Hinkle, Holmquist, Hudgins, Hunt, Hunter, Jarrett, Kagi, Kenney, Kessler, Kirby, Kristiansen, Lantz, Linville, Lovick, Mastin, McCoy, McDermott, McDonald, McIntire, McMahan, McMorris, Mielke, Miloscia, Moeller, Morrell, Morris, Murray, Newhouse, Nixon, O'Brien, Orcutt, Ormsby, Pearson, Pettigrew, Priest, Quall, Roach, Rockefeller, Rodne, Romero, Ruderman, Santos, Schindler, Schoesler, Schual-Berke, Sehlin, Shabro, D. Simpson, G. Simpson, Skinner, Sommers, Sullivan, Sump, Talcott, Tom, Upthegrove, Veloria, Wallace, Wood, Woods and Mr. Speaker - 97.

             Excused: Representative Edwards - 1.

             SECOND ENGROSSED SUBSTITUTE SENATE BILL NO. 5536, as amended by the House, having received the necessary constitutional majority, was declared passed.

MESSAGE FROM THE SENATE

March 9, 2004

Mr. Speaker:

             The Senate refuses to concur in the House amendments to SENATE BILL NO. 6485 and asks the House to recede therefrom, and the same is herewith transmitted.

Milt H. Doumit, Secretary

             There being no objection, the rules were suspended and SENATE BILL NO. 6485 was returned to second reading for purpose of amendment.

SECOND READING

             SENATE BILL NO. 6485, By Senators Deccio and Winsley

             Improving the regulatory environment for hospitals.

             The bill was read the second time.

             Representative Cody moved the adoption of amendment (1197):

              Strike everything after the enacting clause and insert the following:

              "NEW SECTION. Sec. 1. (1) The department of health, in cooperation with the Washington state hospital association, shall oversee a pilot project to implement and evaluate strategies to reduce the burden on hospitals, and improve the quality and efficiency, of hospital surveys or audits.

              (2) The pilot project shall also include the state auditor's office, the department of revenue, the department of social and health services, the state board of pharmacy, the department of ecology, the office of the state fire marshal, the department of labor and industries, local building and fire officials, and the joint commission on accreditation of health care organizations.

              (3) Strategies to be implemented and evaluated by the pilot project include, but are not limited to, providing notice of survey and audit visits, consolidation of survey and audit visits, coordination of separate survey and audit visits, deeming of one agency's visits for another, using a combined entrance meeting with hospital management, identifying a standard set of documents to be available for all surveys and audits, and minimizing duplication of required documents.

              (4) The department of health shall report to the legislature by December 1, 2004, regarding the results of the pilot project and the strategies identified for adoption on a statewide basis to improve the regulatory environment for hospitals while assuring the safety and well-being of patients and full compliance with relevant state and local laws.

              NEW SECTION. Sec. 2. A new section is added to chapter 70.41 RCW to read as follows:

              (1) Unless the context clearly requires otherwise, the definitions in this subsection apply throughout this section.

              (a) "Agency" means a department of state government created under RCW 43.17.010 and the office of the state auditor.

              (b) "Audit" means an examination of records or financial accounts to evaluate accuracy and monitor compliance with statutory or regulatory requirements.

              (c) "Hospital" means a hospital licensed under chapter 70.41 RCW.

              (d) "Survey" means an inspection, examination, or site visit conducted by an agency to evaluate and monitor the compliance of a hospital or hospital services or facilities with statutory or regulatory requirements.

              (2) By July 1, 2004, each state agency which conducts hospital surveys or audits shall post to its agency web site a list of the most frequent problems identified in its hospital surveys or audits along with information on how to avoid or address the identified problems, and a person within the agency that a hospital may contact with questions or for further assistance.

              (3) By July 1, 2004, the department of health, in cooperation with other state agencies which conduct hospital surveys or audits, shall develop an instrument, to be provided to every hospital upon completion of a state survey or audit, which allows the hospital to anonymously evaluate the survey or audit process in terms of quality, efficacy, and the extent to which it supported improved patient care and compliance with state law without placing an unnecessary administrative burden on the hospital. The evaluation may be returned to the department of health for distribution to the appropriate agency. The department of health shall annually compile the evaluations in a report to the legislature.

              (4) Except when responding to complaints or immediate public health and safety concerns or when such prior notice would conflict with other state or federal law, any state agency that provides notice of a hospital survey or audit must provide such notice to the hospital no less than four weeks prior to the date of the survey or audit.

              Sec. 3. RCW 70.41.080 and 1995 c 369 s 40 are each amended to read as follows:

              Standards for fire protection and the enforcement thereof, with respect to all hospitals to be licensed hereunder shall be the responsibility of the chief of the Washington state patrol, through the director of fire protection, who shall adopt, after approval by the department, such recognized standards as may be applicable to hospitals for the protection of life against the cause and spread of fire and fire hazards. Such standards shall be consistent with the standards adopted by the federal centers for medicare and medicaid services for hospitals that care for medicare or medicaid beneficiaries. The department upon receipt of an application for a license, shall submit to the director of fire protection in writing, a request for an inspection, giving the applicant's name and the location of the premises to be licensed. Upon receipt of such a request, the chief of the Washington state patrol, through the director of fire protection, or his or her deputy, shall make an inspection of the hospital to be licensed, and if it is found that the premises do not comply with the required safety standards and fire regulations as adopted pursuant to this chapter, he or she shall promptly make a written report to the hospital and to the department listing the corrective actions required and the time allowed for accomplishing such corrections. The applicant or licensee shall notify the chief of the Washington state patrol, through the director of fire protection, upon completion of any corrections required by him or her, and the chief of the Washington state patrol, through the director of fire protection, or his or her deputy, shall make a reinspection of such premises. Whenever the hospital to be licensed meets with the approval of the chief of the Washington state patrol, through the director of fire protection, he or she shall submit to the department a written report approving the hospital with respect to fire protection, and such report is required before a full license can be issued. The chief of the Washington state patrol, through the director of fire protection, shall make or cause to be made inspections of such hospitals at least once a year.

              In cities which have in force a comprehensive building code, the provisions of which are determined by the chief of the Washington state patrol, through the director of fire protection, to be equal to the minimum standards of the code for hospitals adopted by the chief of the Washington state patrol, through the director of fire protection, the chief of the fire department, provided the latter is a paid chief of a paid fire department, shall make the inspection with the chief of the Washington state patrol, through the director of fire protection, or his or her deputy and they shall jointly approve the premises before a full license can be issued.

              Sec. 4. RCW 70.41.120 and 1995 c 282 s 4 are each amended to read as follows:

              The department shall make or cause to be made at least yearly an inspection of all hospitals. Every inspection of a hospital may include an inspection of every part of the premises. The department may make an examination of all phases of the hospital operation necessary to determine compliance with the law and the standards, rules and regulations adopted thereunder. Any licensee or applicant desiring to make alterations or additions to its facilities or to construct new facilities shall, before commencing such alteration, addition or new construction, comply with the regulations prescribed by the department.

              No hospital licensed pursuant to the provisions of this chapter shall be required to be inspected or licensed under other state laws or rules and regulations promulgated thereunder, or local ordinances, relative to hotels, restaurants, lodging houses, boarding houses, places of refreshment, nursing homes, maternity homes, or psychiatric hospitals.

              To avoid unnecessary duplication in inspections, the department shall coordinate with the department of social and health services, the office of the state fire marshal, and local agencies when inspecting facilities over which ((both agencies have)) each agency has jurisdiction, the facilities including but not necessarily being limited to hospitals with both acute care and skilled nursing or psychiatric nursing functions. The department shall notify the office of the state fire marshal and the relevant local agency at least four weeks prior to any inspection conducted under this section and invite their attendance at the inspection, and shall provide a copy of its inspection report to each agency upon completion.

              NEW SECTION. Sec. 5. A new section is added to chapter 70.41 RCW to read as follows:

              (1) The department shall coordinate its hospital construction review process with other state and local agencies having similar review responsibilities, including the department of labor and industries, the office of the state fire marshal, and local building and fire officials. Inconsistencies or conflicts among the agencies shall be identified and eliminated. The department shall provide local agencies with relevant information derived from its construction review process.

              (2) By September 1, 2004, the department shall report to the legislature regarding its implementation of subsection (1) of this section.

              Sec. 6. RCW 70.38.105 and 1996 c 50 s 1 are each amended to read as follows:

              (1) The department is authorized and directed to implement the certificate of need program in this state pursuant to the provisions of this chapter.

              (2) There shall be a state certificate of need program which is administered consistent with the requirements of federal law as necessary to the receipt of federal funds by the state.

              (3) No person shall engage in any undertaking which is subject to certificate of need review under subsection (4) of this section without first having received from the department either a certificate of need or an exception granted in accordance with this chapter.

              (4) The following shall be subject to certificate of need review under this chapter:

              (a) The construction, development, or other establishment of a new health care facility;

              (b) The sale, purchase, or lease of part or all of any existing hospital as defined in RCW 70.38.025;

              (c) Any capital expenditure for the construction, renovation, or alteration of a nursing home which substantially changes the services of the facility after January 1, 1981, provided that the substantial changes in services are specified by the department in rule;

              (d) Any capital expenditure for the construction, renovation, or alteration of a nursing home which exceeds the expenditure minimum as defined by RCW 70.38.025. However, a capital expenditure which is not subject to certificate of need review under (a), (b), (c), or (e) of this subsection and which is solely for any one or more of the following is not subject to certificate of need review:

              (i) Communications and parking facilities;

              (ii) Mechanical, electrical, ventilation, heating, and air conditioning systems;

              (iii) Energy conservation systems;

              (iv) Repairs to, or the correction of, deficiencies in existing physical plant facilities which are necessary to maintain state licensure, however, other additional repairs, remodeling, or replacement projects that are not related to one or more deficiency citations and are not necessary to maintain state licensure are not exempt from certificate of need review except as otherwise permitted by (d)(vi) of this subsection or RCW 70.38.115(13);

              (v) Acquisition of equipment, including data processing equipment, which is not or will not be used in the direct provision of health services;

              (vi) Construction or renovation at an existing nursing home which involves physical plant facilities, including administrative, dining areas, kitchen, laundry, therapy areas, and support facilities, by an existing licensee who has operated the beds for at least one year;

              (vii) Acquisition of land; and

              (viii) Refinancing of existing debt;

              (e) A change in bed capacity of a health care facility which increases the total number of licensed beds or redistributes beds among acute care, nursing home care, and boarding home care if the bed redistribution is to be effective for a period in excess of six months, or a change in bed capacity of a rural health care facility licensed under RCW 70.175.100 that increases the total number of nursing home beds or redistributes beds from acute care or boarding home care to nursing home care if the bed redistribution is to be effective for a period in excess of six months. A health care facility certified as a critical access hospital under 42 U.S.C. 1395i-4 may increase its total number of licensed beds to the total number of beds permitted under 42 U.S.C. 1395i-4 for acute care and may redistribute beds permitted under 42 U.S.C. 1395i-4 among acute care and nursing home care without being subject to certificate of need review. If there is a nursing home licensed under chapter 18.51 RCW within twenty-seven miles of the critical access hospital, the critical access hospital is subject to certificate of need review except for:

              (i) Critical access hospitals which had designated beds to provide nursing home care, in excess of five swing beds, prior to December 31, 2003; or

              (ii) Up to five swing beds.

              Critical access hospital beds not subject to certificate of need review under this subsection (4)(e) will not be counted as either acute care or nursing home care for certificate of need review purposes. If a health care facility ceases to be certified as a critical access hospital under 42 U.S.C. 1395i-4, the hospital may revert back to the type and number of licensed hospital beds as it had when it requested critical access hospital designation;

              (f) Any new tertiary health services which are offered in or through a health care facility or rural health care facility licensed under RCW 70.175.100, and which were not offered on a regular basis by, in, or through such health care facility or rural health care facility within the twelve-month period prior to the time such services would be offered;

              (g) Any expenditure for the construction, renovation, or alteration of a nursing home or change in nursing home services in excess of the expenditure minimum made in preparation for any undertaking under subsection (4) of this section and any arrangement or commitment made for financing such undertaking. Expenditures of preparation shall include expenditures for architectural designs, plans, working drawings, and specifications. The department may issue certificates of need permitting predevelopment expenditures, only, without authorizing any subsequent undertaking with respect to which such predevelopment expenditures are made; and

              (h) Any increase in the number of dialysis stations in a kidney disease center.

              (5) The department is authorized to charge fees for the review of certificate of need applications and requests for exemptions from certificate of need review. The fees shall be sufficient to cover the full cost of review and exemption, which may include the development of standards, criteria, and policies.

              (6) No person may divide a project in order to avoid review requirements under any of the thresholds specified in this section.

              Sec. 7. RCW 70.44.240 and 1997 c 332 s 16 are each amended to read as follows:

              Any public hospital district may contract or join with any other public hospital district, ((any)) publicly owned hospital, ((any)) nonprofit hospital, ((any corporation, any other)) legal entity, or individual to acquire, own, operate, manage, or provide any hospital or other health care facilities or hospital services or other health care services to be used by individuals, districts, hospitals, or others, including ((the)) providing ((of)) health maintenance services. If a public hospital district chooses to contract or join with another party or parties pursuant to the provisions of this chapter, it may do so through ((the establishment of)) establishing a nonprofit corporation, partnership, limited liability company, or other legal entity of its choosing in which the public hospital district and the other party or parties participate. The governing body of such legal entity shall include representatives of the public hospital district, ((including)) which representatives may include members of the public hospital district's board of commissioners. A public hospital district contracting or joining with another party pursuant to the provisions of this chapter may appropriate funds and may sell, lease, or otherwise provide property, personnel, and services to the legal entity established to carry out the contract or joint activity."

              On page 1, line 2 of the title, after "hospitals;" strike the remainder of the title and insert "amending RCW 70.41.080, 70.41.120, 70.38.105, and 70.44.240; adding new sections to chapter 70.41 RCW; and creating a new section."

             Representatives Cody and Bailey spoke in favor of the adoption of the amendment.

             The amendment was adopted.

             There being no objection, the rules were suspended, the second reading considered the third and the bill, as amended by the House, was placed on final passage.

             Representatives Cody and Bailey spoke in favor of passage of the bill.

             The Speaker stated the question before the House to be the final passage of Senate Bill No. 6485, as amended by the House.

ROLL CALL

             The Clerk called the roll on the final passage of Senate Bill No. 6485, as amended by the House, and the bill passed the House by the following vote: Yeas - 97, Nays - 0, Absent - 0, Excused - 1.

             Voting yea: Representatives Ahern, Alexander, Anderson, Armstrong, Bailey, Benson, Blake, Boldt, Buck, Bush, Cairnes, Campbell, Carrell, Chandler, Chase, Clements, Clibborn, Cody, Condotta, Conway, Cooper, Cox, Crouse, Darneille, DeBolt, Delvin, Dickerson, Dunshee, Eickmeyer, Ericksen, Flannigan, Fromhold, Grant, Haigh, Hankins, Hatfield, Hinkle, Holmquist, Hudgins, Hunt, Hunter, Jarrett, Kagi, Kenney, Kessler, Kirby, Kristiansen, Lantz, Linville, Lovick, Mastin, McCoy, McDermott, McDonald, McIntire, McMahan, McMorris, Mielke, Miloscia, Moeller, Morrell, Morris, Murray, Newhouse, Nixon, O'Brien, Orcutt, Ormsby, Pearson, Pettigrew, Priest, Quall, Roach, Rockefeller, Rodne, Romero, Ruderman, Santos, Schindler, Schoesler, Schual-Berke, Sehlin, Shabro, D. Simpson, G. Simpson, Skinner, Sommers, Sullivan, Sump, Talcott, Tom, Upthegrove, Veloria, Wallace, Wood, Woods and Mr. Speaker - 97.

             Excused: Representative Edwards - 1.

             SENATE BILL NO. 6485, as amended by the House, having received the necessary constitutional majority, was declared passed.

SENATE AMENDMENTS TO HOUSE BILL

March 10, 2004

Mr. Speaker:

             The Senate has passed ENGROSSED SUBSTITUTE HOUSE BILL NO. 2531, with the following amendments:

              Strike everything after the enacting clause and insert the following:

"PART I - TOLLING PROVISIONS

              Sec. 101. RCW 36.120.020 and 2002 c 56 s 102 are each amended to read as follows:

              The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

              (1) "Board" means the governing body of a regional transportation investment district.

              (2) "Department" means the Washington state department of transportation.

              (3) "Highway of statewide significance" means an existing or proposed state route or federal interstate designated as a highway of statewide significance by the transportation commission, its successor entity, or the legislature.

              (4) "Lead agency" means a public agency that by law can plan, design, and build a transportation project and has been so designated by the district.

              (5) "Regional transportation investment district" or "district" means a municipal corporation whose boundaries are coextensive with two or more contiguous counties and that has been created by county legislative authorities and a vote of the people under this chapter to implement a regional transportation investment plan.

              (6) "Regional transportation investment district planning committee" or "planning committee" means the advisory committee created under RCW 36.120.030 to create and propose to county legislative authorities a regional transportation investment plan to develop, finance, and construct transportation projects.

              (7) "Regional transportation investment plan" or "plan" means a plan to develop, construct, and finance a transportation project or projects.

              (8) "Transportation project" means:

              (a) A capital improvement or improvements to a highway that has been designated, in whole or in part, as a highway of statewide significance, including an extension, that:

              (i) Adds a lane or new lanes to an existing state or federal highway; or

              (ii) Repairs or replaces a lane or lanes damaged by an event declared an emergency by the governor before January 1, 2002.

              (b) A capital improvement or improvements to all or a portion of a highway of statewide significance, including an extension, and may include the following associated multimodal capital improvements:

              (i) Approaches to highways of statewide significance;

              (ii) High-occupancy vehicle lanes;

              (iii) Flyover ramps;

              (iv) Park and ride lots;

              (v) Bus pullouts;

              (vi) Vans for vanpools;

              (vii) Buses; and

              (viii) Signalization, ramp metering, and other transportation system management improvements.

              (c) A capital improvement or improvements to all or a portion of a city street, county road, or existing highway or the creation of a new highway that intersects with a highway of statewide significance, if all of the following conditions are met:

              (i) The project is included in a plan that makes highway improvement projects that add capacity to a highway or highways of statewide significance;

              (ii) The secretary of transportation determines that the project would better relieve traffic congestion than investing that same money in adding capacity to a highway of statewide significance;

              (iii) Matching money equal to one-third of the total cost of the project is provided by local entities, including but not limited to a metropolitan planning organization, county, city, port, or private entity in which a county participating in a plan is located. Local entities may use federal grants to meet this matching requirement;

              (iv) In no case may the cumulative regional transportation investment district contribution to all projects constructed under this subsection (8)(c) exceed ten percent of the revenues generated by the district;

              (v) In no case may the cumulative regional transportation investment district contribution to all projects constructed under this subsection (8)(c) exceed one billion dollars; and

              (vi) The specific projects are included within the plan and submitted as part of the plan to a vote of the people.

              (d) Operations, preservation, and maintenance are excluded from this definition and may not be included in a regional transportation investment plan. However, operations, preservation, and maintenance of toll-related facilities where toll revenues have been pledged for the payment of contracts is expressly authorized and may be included in a regional transportation investment plan.

              (9) "Weighted vote" means a vote that reflects the population each board or planning committee member represents relative to the population represented by the total membership of the board or planning committee. Population will be determined using the federal 2000 census or subsequent federal census data.

              Sec. 102. RCW 36.120.050 and 2003 c 350 s 4 are each amended to read as follows:

              (1) A regional transportation investment district planning committee may, as part of a regional transportation investment plan, recommend the imposition of some or all of the following revenue sources, which a regional transportation investment district may impose upon approval of the voters as provided in this chapter:

              (a) A regional sales and use tax, as specified in RCW 82.14.430, of up to 0.5 percent of the selling price, in the case of a sales tax, or value of the article used, in the case of a use tax, upon the occurrence of any taxable event in the regional transportation investment district;

              (b) A local option vehicle license fee, as specified under RCW 82.80.100, of up to one hundred dollars per vehicle registered in the district. As used in this subsection, "vehicle" means motor vehicle as defined in RCW 46.04.320. Certain classes of vehicles, as defined under chapter 46.04 RCW, may be exempted from this fee;

              (c) A parking tax under RCW 82.80.030;

              (d) A local motor vehicle excise tax under RCW 81.100.060, ((and)) chapter 81.104 RCW, and section 302 of this act;

              (e) A local option fuel tax under RCW 82.80.120;

              (f) An employer excise tax under RCW 81.100.030; and

              (g) Vehicle tolls on new or reconstructed facilities or, in the case of improvements to a bridge or viaduct, any approaches or connectors to the bridge or viaduct. Unless otherwise specified by law or contract, the department shall administer the collection of vehicle tolls on designated facilities, and the state transportation commission, or its successor, shall be the tolling authority.

              (2) Taxes, fees, and tolls may not be imposed without an affirmative vote of the majority of the voters within the boundaries of the district voting on a ballot proposition as set forth in RCW 36.120.070. Revenues from these taxes and fees may be used only to implement the plan as set forth in this chapter. A district may contract with the state department of revenue or other appropriate entities for administration and collection of any of the taxes or fees authorized in this section.

              (3) Existing statewide motor vehicle fuel and special fuel taxes, at the distribution rates in effect on January 1, 2001, are not intended to be altered by this chapter.

              Sec. 103. RCW 47.56.076 and 2002 c 56 s 403 are each amended to read as follows:

              Upon approval of a majority of the voters within its boundaries voting on the ballot proposition, and only for the purposes authorized in RCW 36.120.050(1)(((f))) (g), a regional transportation investment district may impose vehicle tolls on state routes where improvements financed in whole or in part by a regional transportation investment district add additional lanes to, or reconstruct lanes on, a highway of statewide significance, and in the case of improving a bridge or viaduct, any approaches or connectors to the bridge or viaduct. The department shall administer the collection of vehicle tolls on designated facilities unless otherwise specified in law or by contract, and the state transportation commission, or its successor, shall ((be the tolling authority)) set and impose the tolls in amounts sufficient to implement the plan and issue bonds and maintain and operate the toll facility within the scope and intent of the regional transportation investment plan.

              NEW SECTION. Sec. 104. A new section is added to chapter 47.56 RCW to read as follows:

              Notwithstanding any provision to the contrary in this chapter, a regional transportation investment district may impose vehicle tolls on either Lake Washington bridge upon approval of a majority of the voters voting on a regional transportation investment plan ballot measure within its boundaries as authorized in chapter 36.120 RCW and RCW 47.56.076.

PART II - BALLOT MEASURES

              Sec. 201. RCW 36.120.070 and 2002 c 56 s 107 are each amended to read as follows:

              Two or more contiguous county legislative authorities, upon receipt of the regional transportation investment plan under RCW 36.120.040, may ((certify the plan to the ballot, including identification of the tax options)) submit to the voters of the proposed district a single ballot measure that approves formation of the district, approves the regional transportation investment plan, and approves the revenue sources necessary to ((fund)) finance the plan. ((County legislative authorities)) The planning committee may draft ((a ballot title,)) the ballot measure on behalf of the county legislative authorities, and the county legislative authorities may give notice as required by law for ballot measures, and perform other duties as required to ((put the plan before)) submit the measure to the voters of the proposed district for their approval or rejection ((as a single ballot measure that both approves formation of the district and approves the plan)). Counties may negotiate interlocal agreements necessary to implement the plan. The electorate will be the voters voting within the boundaries of the participating counties. A simple majority of the total persons voting on the single ballot measure ((to approve the plan, establish the district, and approve the taxes and fees)) is required for approval of the measure.

PART III - MOTOR VEHICLE SURCHARGE

              Sec. 301. RCW 81.100.080 and 1990 c 43 s 19 are each amended to read as follows:

              Funds collected under RCW 81.100.030 or 81.100.060 and any investment earnings accruing thereon shall be used by the county or the regional transportation investment district in a manner consistent with the regional transportation plan only for costs of collection, costs of preparing, adopting, and enforcing agreements under RCW 81.100.030(3), for construction of high occupancy vehicle lanes and related facilities, mitigation of environmental concerns that result from construction or use of high occupancy vehicle lanes and related facilities, payment of principal and interest on bonds issued for the purposes of this section, for high occupancy vehicle programs as defined in RCW 81.100.020(5), and for commuter rail projects in accordance with RCW 81.104.120. Except for funds raised by a regional transportation investment district, no funds collected under RCW 81.100.030 or 81.100.060 after June 30, 2000, may be pledged for the payment or security of the principal or interest on any bonds issued for the purposes of this section. Not more than ten percent of the funds may be used for transit agency high occupancy vehicle programs.

              Priorities for construction of high occupancy vehicle lanes and related facilities shall be as follows:

              (1)(a) To accelerate construction of high occupancy vehicle lanes on the interstate highway system, as well as related facilities;

              (b) To finance or accelerate construction of high occupancy vehicle lanes on the noninterstate state highway system, as well as related facilities.

              (2) To finance construction of high occupancy vehicle lanes on local arterials, as well as related facilities.

              Moneys received by an agency under this chapter shall be used in addition to, and not as a substitute for, moneys currently used by the agency for the purposes specified in this section.

              Counties and regional transportation investment districts may contract with cities or the state department of transportation for construction of high occupancy vehicle lanes and related facilities, and may issue general obligation bonds to fund such construction and use funds received under this chapter to pay the principal and interest on such bonds.

              New Section. Sec. 302. A new section is added to chapter 82.80 RCW to read as follows:

              A regional transportation investment district may, with voter approval and as part of a regional transportation investment plan, impose a local option surcharge of not more than three-tenths of one percent of the value on vehicles registered to a person residing within the district. The proceeds collected pursuant to this section shall be used for transportation projects as defined in RCW 36.120.020. No surcharge may be imposed on new vehicles, except that the surcharge shall apply to the initial registration of a vehicle previously licensed in another jurisdiction.

              An investment district imposing a tax under this section shall contract, before the effective date of the resolution or ordinance imposing a surcharge, administration and collection to the state department of licensing, and department of revenue, as appropriate, which shall deduct an amount, as provided by contract, for administration and collection expenses incurred by the department. All administrative provisions in chapters 82.03, 82.32, and 82.44 RCW shall insofar as they are applicable to motor vehicle excise taxes, be applicable to surcharges imposed under this section.

PART IV - EXPANDING LOCAL TRANSPORTATION IMPROVEMENT AUTHORITY

              NEW SECTION. Sec. 401. A new section is added to chapter 36.73 RCW to read as follows: