1313

1313.E AMS ARED S2444.2

EHB 1313 - S COMM AMD

By Committee on Agriculture & Rural Economic Development

NOT ADOPTED 4/15/99

Strike everything after the enacting clause and insert the following:

"NEW SECTION. Sec. 1. The legislature finds that while Washington's economy is currently prospering, economic growth continues to be uneven, particularly as between metropolitan and rural areas. This has created in effect two Washingtons. One afflicted by inadequate infrastructure to support and attract investment, another suffering from congestion and soaring housing prices. In order to address these problems, the legislature intends to use resources strategically to build on our state's strengths while addressing threats to our prosperity.

PART I

RURAL ECONOMIC DEVELOPMENT

Enhanced Flexibility for Use of Community Economic

Revitalization Board Funds

Sec. 101. RCW 43.160.010 and 1996 c 51 s 1 are each amended to read as follows:

(1) The legislature finds that it is the public policy of the state of Washington to direct financial resources toward the fostering of economic development through the stimulation of investment and job opportunities and the retention of sustainable existing employment for the general welfare of the inhabitants of the state. Reducing unemployment and reducing the time citizens remain jobless is important for the economic welfare of the state. A valuable means of fostering economic development is the construction of public facilities which contribute to the stability and growth of the state's economic base. Strengthening the economic base through issuance of industrial development bonds, whether single or umbrella, further serves to reduce unemployment. Consolidating issues of industrial development bonds when feasible to reduce costs additionally advances the state's purpose to improve economic vitality. Expenditures made for these purposes as authorized in this chapter are declared to be in the public interest, and constitute a proper use of public funds. A community economic revitalization board is needed which shall aid the development of economic opportunities. The general objectives of the board should include:

(a) Strengthening the economies of areas of the state which have experienced or are expected to experience chronically high unemployment rates or below average growth in their economies;

(b) Encouraging the diversification of the economies of the state and regions within the state in order to provide greater seasonal and cyclical stability of income and employment;

(d) Encouraging new economic development or expansions to maximize employment;

(e) Encouraging the retention of viable existing firms and employment; and

(f) Providing incentives for expansion of employment opportunities for groups of state residents that have been less successful relative to other groups in efforts to gain permanent employment.

(2) The legislature also finds that the state's economic development efforts can be enhanced by, in certain instances, providing funds to improve state highways ((~~in the vicinity of new~~)), county roads, or city streets for industries considering locating or expanding in this state ((~~or existing industries that are considering significant expansion~~)).

(a) The legislature finds it desirable to provide a process whereby the need for diverse public works improvements necessitated by planned economic development can be addressed in a timely fashion and with coordination among all responsible governmental entities.

(b) ((It is the intent of the legislature to create an economic development account within the motor vehicle fund from which expenditures can be made by the department of transportation for state highway improvements necessitated by planned economic development.)) All ((~~such~~)) transportation improvements on state highways must first be approved by the state transportation commission and the community economic revitalization board in accordance with the procedures established by RCW 43.160.074 and 47.01.280. ((It is further the intent of the legislature that such improvements not jeopardize any other planned highway construction projects. The improvements are intended to be of limited size and cost, and to include such items as additional turn lanes, signalization, illumination, and safety improvements.))

(3) The legislature also finds that the state's economic development efforts can be enhanced by, in certain instances, providing funds to assist development of telecommunications infrastructure that supports business development, retention, and expansion in rural natural resources impact areas and rural counties of the state.

(4) The legislature also finds that the state's economic development efforts can be enhanced by providing funds to improve markets for those recyclable materials representing a large fraction of the waste stream. The legislature finds that public facilities which result in private construction of processing or remanufacturing facilities for recyclable materials are eligible for consideration from the board.

((~~(4)~~)) (5) The legislature finds that sharing economic growth state-wide is important to the welfare of the state. Rural counties and rural natural resources impact areas do not share in the economic vitality of the Puget Sound region. The ability of these communities to pursue business and job retention, expansion, and development opportunities depends on their capacity to ready necessary economic development project plans, sites, permits, and infrastructure for private investments. Project-specific planning, predevelopment, and infrastructure ((~~is one of several~~)) are critical ingredients ((~~that are critical~~)) for economic development. Rural counties and rural natural resources impact areas generally lack ((~~the infrastructure~~)) these necessary tools and resources to diversify and revitalize their economies. It is, therefore, the intent of the legislature to increase the ((~~availability of funds to help provide infrastructure to rural natural resource impact areas~~)) amount of funding available through the community economic revitalization board for rural counties and rural natural resources impact areas, and to authorize flexibility for available resources in these areas to help fund planning, predevelopment, and construction costs of infrastructure and facilities and sites that foster economic vitality and diversification.

Sec. 102. RCW 43.160.020 and 1997 c 367 s 8 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Board" means the community economic revitalization board.

(2) "Bond" means any bond, note, debenture, interim certificate, or other evidence of financial indebtedness issued by the board pursuant to this chapter.

(3) "Department" means the department of community, trade, and economic development.

(4) "Financial institution" means any bank, savings and loan association, credit union, development credit corporation, insurance company, investment company, trust company, savings institution, or other financial institution approved by the board and maintaining an office in the state.

(5) "Industrial development facilities" means "industrial development facilities" as defined in RCW 39.84.020.

(6) "Industrial development revenue bonds" means tax-exempt revenue bonds used to fund industrial development facilities.

(7) "Local government" or "political subdivision" means any port district, county, city, town, special purpose district, and any other municipal corporations or quasi-municipal corporations in the state providing for public facilities under this chapter.

(8) "Sponsor" means any of the following entities which customarily provide service or otherwise aid in industrial or other financing and are approved as a sponsor by the board: A bank, trust company, savings bank, investment bank, national banking association, savings and loan association, building and loan association, credit union, insurance company, or any other financial institution, governmental agency, or holding company of any entity specified in this subsection.

(9) "Umbrella bonds" means industrial development revenue bonds from which the proceeds are loaned, transferred, or otherwise made available to two or more users under this chapter.

(10) "User" means one or more persons acting as lessee, purchaser, mortgagor, or borrower under a financing document and receiving or applying to receive revenues from bonds issued under this chapter.

(11) "Public facilities" means a project of a local government for the planning, acquisition, construction, repair, reconstruction, replacement, rehabilitation, or improvement of bridges, roads, domestic and industrial water, flood control, earth stabilization, sanitary sewer, storm sewer, railroad, electricity, telecommunications, transportation, natural gas, buildings or structures, and port facilities, all for the purpose of job creation, job retention, or job expansion.

(12) "Rural county" means a county with a population density of less than one hundred persons per square mile as determined by the office of financial management.

(13) "Rural natural resources impact area" means:

(a) A nonmetropolitan county, as defined by the 1990 decennial census, that meets three of the five criteria set forth in subsection ((~~(13)~~)) (14) of this section;

(b) A nonmetropolitan county with a population of less than forty thousand in the 1990 decennial census, that meets two of the five criteria as set forth in subsection ((~~(13)~~)) (14) of this section; or

(c) A nonurbanized area, as defined by the 1990 decennial census, that is located in a metropolitan county that meets three of the five criteria set forth in subsection ((~~(13)~~)) (14) of this section.

((~~(13)~~)) (14) For the purposes of designating rural natural resources impact areas, the following criteria shall be considered:

(a) A lumber and wood products employment location quotient at or above the state average;

(b) A commercial salmon fishing employment location quotient at or above the state average;

(d) Projected or actual direct commercial salmon fishing job losses of one hundred positions or more; and

(e) An unemployment rate twenty percent or more above the state average. The counties that meet these criteria shall be determined by the employment security department for the most recent year for which data is available. For the purposes of administration of programs under this chapter, the United States post office five-digit zip code delivery areas will be used to determine residence status for eligibility purposes. For the purpose of this definition, a zip code delivery area of which any part is ten miles or more from an urbanized area is considered nonurbanized. A zip code totally surrounded by zip codes qualifying as nonurbanized under this definition is also considered nonurbanized. The office of financial management shall make available a zip code listing of the areas to all agencies and organizations providing services under this chapter.

Sec. 103. RCW 43.160.060 and 1996 c 51 s 5 are each amended to read as follows:

The board is authorized to make direct loans to political subdivisions of the state for the purposes of assisting the political subdivisions in financing the cost of public facilities, including development of land and improvements for public facilities, project-specific environmental, capital facilities, land use, permitting, feasibility and marketing studies and plans; project design, site planning, and analysis; project debt and revenue impact analysis; as well as the construction, rehabilitation, alteration, expansion, or improvement of the facilities. A grant may also be authorized for purposes designated in this chapter, but only when, and to the extent that, a loan is not reasonably possible, given the limited resources of the political subdivision and the finding by the board that ((~~unique~~)) financial circumstances ((~~exist. The board shall not obligate more than twenty percent of its biennial appropriation as grants~~)) require grant assistance to enable the project to move forward.

Application for funds shall be made in the form and manner as the board may prescribe. In making grants or loans the board shall conform to the following requirements:

(1) The board shall not provide financial assistance:

(a) For a project the primary purpose of which is to facilitate or promote a retail shopping development or expansion.

(b) For any project that evidence exists would result in a development or expansion that would displace existing jobs in any other community in the state, except a project that would relocate a business from a nondistressed urban area to a rural county or rural natural resources impact area.

(d) For a construction project to any local government applicant that is not, at the time of application for financial assistance, in compliance with the provisions of chapter 36.70A RCW.

(2) The board shall only provide financial assistance:

(a) For those projects which would result in specific private developments or expansions (i) in manufacturing, production, food processing, assembly, warehousing, advanced technology, research and development, and industrial distribution; (ii) for processing recyclable materials or for facilities that support recycling, including processes not currently provided in the state, including but not limited to, de-inking facilities, mixed waste paper, plastics, yard waste, and problem-waste processing; (iii) for manufacturing facilities that rely significantly on recyclable materials, including but not limited to waste tires and mixed waste paper; (iv) which support the relocation of businesses from nondistressed urban areas to ((~~distressed~~)) rural counties or rural natural resources impact areas; or (v) which substantially support the trading of goods or services outside of the state's borders.

(b) For projects which it finds will improve the opportunities for the successful maintenance, establishment, or expansion of industrial or commercial plants or will otherwise assist in the creation or retention of long-term economic opportunities.

(c) When the application includes convincing evidence that a specific private development or expansion is ready to occur and will occur only if the public facility improvement is made.

(3) The board shall prioritize each proposed project according to:

(a) The relative benefits provided to the community by the jobs the project would create, not just the total number of jobs it would create after the project is completed and according to the unemployment rate in the area in which the jobs would be located((~~. As long as there is more demand for financial assistance than there are funds available, the board is instructed to fund projects in order of their priority~~)); and

(b) The rate of return of the state's investment, that includes the expected increase in state and local tax revenues associated with the project.

(4) A responsible official of the political subdivision shall be present during board deliberations and provide information that the board requests.

Before any financial assistance application is approved, the political subdivision seeking the assistance must demonstrate to the community economic revitalization board that no other timely source of funding is available to it at costs reasonably similar to financing available from the community economic revitalization board.

Sec. 104. RCW 43.160.070 and 1998 c 321 s 27 (Referendum Bill No. 49) are each amended to read as follows:

Public facilities financial assistance, when authorized by the board, is subject to the following conditions:

(1) The moneys in the public facilities construction loan revolving account and the distressed county public facilities construction loan account shall be used solely to fulfill commitments arising from financial assistance authorized in this chapter or, during the 1989-91 fiscal biennium, for economic development purposes as appropriated by the legislature. The total outstanding amount which the board shall dispense at any time pursuant to this section shall not exceed the moneys available from the accounts. The total amount of outstanding financial assistance in Pierce, King, and Snohomish counties shall never exceed sixty percent of the total amount of outstanding financial assistance disbursed by the board under this chapter without reference to financial assistance provided under RCW 43.160.220.

(2) On contracts made for public facilities loans the board shall determine the interest rate which loans shall bear. The interest rate shall not exceed ten percent per annum. The board may provide reasonable terms and conditions for repayment for loans, including partial forgiveness of loan principal and interest payments on projects located in rural counties or rural natural resources impact areas, as the board determines. The loans shall not exceed twenty years in duration.

(3) Repayments of loans made from the public facilities construction loan revolving account under the contracts for public facilities construction loans shall be paid into the public facilities construction loan revolving account. Repayments of loans made from the distressed county public facilities construction loan account under the contracts for public facilities construction loans shall be paid into the distressed county public facilities construction loan account. Repayments of loans from moneys from the new appropriation from the public works assistance account for the fiscal biennium ending June 30, 1999, shall be paid into the public works assistance account.

(4) When every feasible effort has been made to provide loans and loans are not possible, the board may provide grants upon finding that unique circumstances exist.

Sec. 105. RCW 43.160.076 and 1998 c 321 s 28 (Referendum Bill No. 49) and 1998 c 55 s 4 are each reenacted and amended to read as follows:

(1) Except as authorized to the contrary under subsection (2) of this section, from all funds available to the board for financial assistance in a biennium under this chapter without reference to financial assistance provided under RCW 43.160.220, the board shall spend at least seventy-five percent for financial assistance for projects in ((~~distressed~~)) rural counties or rural natural resources impact areas. ((For purposes of this section, the term "distressed counties" includes any county, in which the average level of unemployment for the three years before the year in which an application for financial assistance is filed, exceeds the average state unemployment for those years by twenty percent.))

(2) If at any time during the last six months of a biennium the board finds that the actual and anticipated applications for qualified projects in ((~~distressed~~)) rural counties or rural natural resources impact areas are clearly insufficient to use up the seventy-five percent allocation under subsection (1) of this section, then the board shall estimate the amount of the insufficiency and during the remainder of the biennium may use that amount of the allocation for financial assistance to projects not located in ((~~distressed~~)) rural counties or rural natural resources impact areas.

((~~(3) This section expires June 30, 2000.~~))

Sec. 106. RCW 43.160.900 and 1993 c 320 s 8 are each amended to read as follows:

(1) The community economic revitalization board shall report to the appropriate standing committees of the legislature biennially on the implementation of this chapter. The report shall include information on the number of applications for community economic revitalization board assistance, the number and types of projects approved, the grant or loan amount awarded each project, the projected number of jobs created or retained by each project, the actual number of jobs created or retained by each project, the amount of state and local tax revenue generated by projects funded under this chapter, the number of delinquent loans, and the number of project terminations. The report may also include additional performance measures and recommendations for programmatic changes. The first report shall be submitted by December 1, 1994.

(2) The joint legislative audit and review committee shall conduct performance reviews on the effectiveness of the program administered by the board under this chapter. The committee may contract for services to conduct the performance reviews. The costs for the performance reviews shall be paid from repayments of principal and interest on loans made under this chapter. The performance reviews shall be submitted to the appropriate committees of the legislature by December 1, 2000, December 1, 2004, and December 1, 2008.

Sec. 107. RCW 43.160.200 and 1996 c 51 s 9 are each amended to read as follows:

(1) The economic development account is created within the public facilities construction loan revolving fund under RCW 43.160.080. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used only for the purposes of RCW 43.160.010((~~(3)~~)) (5) and this section. The account is subject to allotment procedures under chapter 43.88 RCW.

(2) Applications under this section for assistance from the economic development account are subject to all of the applicable criteria set forth under this chapter, as well as procedures and criteria established by the board, except as otherwise provided.

(3) Eligible applicants under this section are limited to political subdivisions of the state in rural natural resources impact areas ((~~that demonstrate, to the satisfaction of the board, the local economy's dependence on the forest products and salmon fishing industries~~)) and rural counties.

(4) Applicants must demonstrate that their request is part of an economic development plan consistent with applicable state planning requirements. Applicants must demonstrate that tourism projects have been approved by the local government. Industrial projects must be approved by the local government and the associate development organization.

(5) Publicly owned projects may be financed under this section upon proof by the applicant that the public project is a necessary component of, or constitutes in whole, a tourism project.

(6) Applications must demonstrate local match and participation. Such match may include: Land donation, other public or private funds or both, or other means of local commitment to the project.

(7) Board financing for project-specific environmental, capital facilities, land use, permitting, feasibility and marketing studies and plans; project engineering, design, and site planning and analysis; and project debt and revenue impact analysis shall not exceed ((~~twenty-five~~)) fifty thousand dollars per study. Board funds for ((~~feasibility studies~~)) these purposes may be provided as a grant and require a ((~~dollar for dollar~~)) match ((~~with up to one-half in-kind match allowed~~)).

(8) Board financing for tourism projects shall not exceed two hundred fifty thousand dollars. Other public facility construction projects under this section shall not exceed ((~~five hundred thousand~~)) one million dollars. Loans with flexible terms and conditions to meet the needs of the applicants shall be provided. Grants may also be authorized, but only when, and to the extent that, a loan is not reasonably possible, given the limited resources of the political subdivision.

(9) The board shall develop guidelines for allowable local match and ((~~feasibility studies~~)) planning and predevelopment activities.

(10) The board may allow de minimis general system improvements to be funded if they are critically linked to the viability of the economic development project assisted under this section.

(11) Applications under this section need not demonstrate evidence that specific private development or expansion is ready to occur or will occur if funds are provided.

((~~(11)~~)) (12) The board shall establish guidelines for providing financial assistance under this section to ensure that the requirements of this chapter are complied with. The guidelines shall include:

(a) A process to equitably compare and evaluate applications from competing communities.

(b) Criteria to ensure that approved projects will have a high probability of success and are likely to provide long-term economic benefits to the community. The criteria shall include: (i) A minimum amount of local participation, determined by the board per application, to verify community support for the project; (ii) an analysis that establishes the project is feasible using standard economic principles; and (iii) an explanation from the applicant regarding how the project is consistent with the communities' economic strategy and goals.

(c) A method of evaluating the impact of the financial assistance on the economy of the community and whether the financial assistance achieved its purpose.

PART II

HOUSING

Increasing the Housing Finance Commission's Debt Limit

Sec. 201. RCW 43.180.160 and 1996 c 310 s 2 are each amended to read as follows:

The total amount of outstanding indebtedness of the commission may not exceed ((~~two~~)) three billion dollars at any time. The calculation of outstanding indebtedness shall include the initial principal amount of an issue and shall not include interest that is either currently payable or that accrues as a part of the face amount of an issue payable at maturity or earlier redemption. Outstanding indebtedness shall not include notes or bonds as to which the obligation of the commission has been satisfied and discharged by refunding or for which payment has been provided by reserves or otherwise.

NEW SECTION. Sec. 202. A new section is added to chapter 43.63A RCW to read as follows:

The department shall establish and administer a "one-stop clearinghouse" to coordinate state assistance for growers and nonprofit organizations in developing housing for agricultural employees. Growers, housing authorities, and nonprofit organizations shall have direct access to the one-stop clearinghouse. The department one-stop clearinghouse shall provide assistance on planning and design, building codes, temporary worker housing regulations, financing options, and management to growers and nonprofit organizations interested in farmworker construction. The department one-stop clearinghouse shall also provide educational materials and services to local government authorities on Washington state law concerning farmworker housing.

PART III

RURAL DEVELOPMENT COUNCIL

NEW SECTION. Sec. 301. A new section is added to chapter 43.31 RCW to read as follows:

(1) The rural development council executive committee and the department are authorized to establish a successor organization to the rural development council executive committee created under RCW 43.31.855. The purpose of the successor organization is, at least in part, to improve the delivery and accessibility of public and private resources for meeting the needs of rural communities in Washington.

(2) For purposes of this section, "successor organization" means a private nonprofit corporation created specifically to assume responsibility for administering funds provided by the federal government and other sources to carry out the purpose state in subsection (1) of this section. A successor organization must qualify as a tax-exempt nonprofit corporation under section 501(c) of the federal internal revenue code.

(3) This section expires June 30, 2002.

NEW SECTION. Sec. 302. A new section is added to chapter 43.31 RCW to read as follows:

(1) The executive committee and the department are authorized to take all steps reasonably necessary and proper to effect the orderly transition of the rural development council executive committee to the successor organization. This authorization includes, but is not necessarily limited to, the authority to:

(a) Transfer any equipment, records, other assets, or contracts for services to the successor organization under appropriate terms and conditions, including reasonable compensation for assets acquired with state funds;

(b) Assist in the establishment of a successor organization, including entering into contracts preparatory to the establishment of the organization; and

(c) Unless otherwise provided by agreement, assign to the successor organization any membership agreements, contracts, license, and other duties and obligations related to the rural development council.

(2) This section expires June 30, 2002.

Sec. 303. RCW 42.52.080 and 1994 c 154 s 108 are each amended to read as follows:

(1) No former state officer or state employee may, within a period of one year from the date of termination of state employment, accept employment or receive compensation from an employer if:

(a) The officer or employee, during the two years immediately preceding termination of state employment, was engaged in the negotiation or administration on behalf of the state or agency of one or more contracts with that employer and was in a position to make discretionary decisions affecting the outcome of such negotiation or the nature of such administration;

(b) Such a contract or contracts have a total value of more than ten thousand dollars; and

(c) The duties of the employment with the employer or the activities for which the compensation would be received include fulfilling or implementing, in whole or in part, the provisions of such a contract or contracts or include the supervision or control of actions taken to fulfill or implement, in whole or in part, the provisions of such a contract or contracts. This subsection shall not be construed to prohibit a state officer or state employee from accepting employment with a state employee organization.

(2) No person who has served as a state officer or state employee may, within a period of two years following the termination of state employment, have a direct or indirect beneficial interest in a contract or grant that was expressly authorized or funded by specific legislative or executive action in which the former state officer or state employee participated.

(3) No former state officer or state employee may accept an offer of employment or receive compensation from an employer if the officer or employee knows or has reason to believe that the offer of employment or compensation was intended, in whole or in part, directly or indirectly, to influence the officer or employee or as compensation or reward for the performance or nonperformance of a duty by the officer or employee during the course of state employment.

(4) No former state officer or state employee may accept an offer of employment or receive compensation from an employer if the circumstances would lead a reasonable person to believe the offer has been made, or compensation given, for the purpose of influencing the performance or nonperformance of duties by the officer or employee during the course of state employment.

(5) No former state officer or state employee may at any time subsequent to his or her state employment assist another person, whether or not for compensation, in any transaction involving the state in which the former state officer or state employee at any time participated during state employment. This subsection shall not be construed to prohibit any employee or officer of a state employee organization from rendering assistance to state officers or state employees in the course of employee organization business.

(6) As used in this section, "employer" means a person as defined in RCW 42.52.010 or any other entity or business that the person owns or in which the person has a controlling interest. For purposes of subsection (1) of this section, the term "employer" does not include a successor organization to the rural development council under chapter 43.31 RCW.

NEW SECTION. Sec. 304. A new section is added to chapter 43.31 RCW to read as follows:

Notwithstanding anything to the contrary in chapter 41.06 RCW or any other provision of law, the department may contract to provide funding to a successor organization under section 301 of this act to carry out activities of the organization that are consistent with the department's powers and duties. All moneys for contracts entered into under this section are subject to appropriation.

NEW SECTION. Sec. 305. The following acts or parts of acts, as now existing or hereafter amended, are each repealed, effective June 30, 2000:

(1) RCW 43.31.855 (Rural development council) and 1997 c 377 s 1;

(2) RCW 43.31.857 (Rural development council‑-Financial contributions encouraged) and 1997 c 377 s 2; and

(3) 1997 c 377 s 3 (uncodified).

PART IV

ECONOMIC VITALITY COMMITTEE

NEW SECTION. Sec. 401. (1) The legislature shall establish an ad hoc economic development group to analyze potential economic development projects of state-wide significance and recommend appropriate administrative or legislative actions.

(2) The group shall include one representative each from the department of community, trade, and economic development, the department of agriculture, and the department of revenue as well as two representatives from rural economic development councils appointed by the legislature.

(3) The group shall promote economic development and business diversification throughout the state with special attention given to the economic difficulties of rural counties.

(4) In order to expedite coordinated responses, the governor may direct the group to meet on an emergency basis when projects of state-wide significance arise.

(5) The department of community, trade, and economic development shall establish criteria to determine whether a project meets the standards of a "project of state-wide significance." These criteria may include such economic indicators as local unemployment and personal income levels and project scope indicators such as the assessed value of the project in relation to the assessed value of the county.

PART V

RURAL WASHINGTON LOAN FUND

NEW SECTION. Sec. 501. The legislature finds that:

(1) The economic health and well-being of the state is of substantial public concern, particularly in geographic areas of high unemployment, economic stagnation, and poverty.

(2) The consequences of minimal economic activity and persistent unemployment and underemployment are serious threats to the safety, health, and welfare of residents of these geographic areas, decreasing the value of private investments and jeopardizing the sources of public revenue.

(3) The economic and social interdependence of communities and the vitality of industrial and economic activity necessitates and partially depends upon preventing substantial dislocation of residents and rebuilding the diversification of the areas' economy.

(4) The ability to remedy problems in stagnant areas of the state is beyond the power and control of the regulatory process and influence of the state; and the ordinary operations of private enterprise, without additional governmental assistance, are insufficient to adequately remedy the problems of poverty and unemployment.

(5) Revitalization of depressed communities requires stimulation of private investment, development of new business ventures, provision of capital to ventures sponsored by local organizations and capable of growth in the business markets, and assistance to viable, but underfinanced, small businesses in order to create and preserve jobs that are sustainable in the local economy.

Therefore, the legislature declares there to be a substantial public purpose in providing capital to promote economic development and job creation in areas of economic stagnation, unemployment, and poverty. To accomplish this purpose, the legislature hereby creates the rural Washington loan fund and vests in the department of community, trade, and economic development the authority to spend federal funds to stimulate the economy of distressed areas.

NEW SECTION. Sec. 502. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Department" means the department of community, trade, and economic development.

(2) "Director" means the director of community, trade, and economic development.

(3) "Disabled person" means a person with a physical or mental impairment that substantially limits a major life activity. The impairment must be material and medically cognizable or diagnosable. The impairment must also be permanent in that it is seldom significantly corrected by medical replacement, therapy, or surgical means. Impairment does not include drug or alcohol addiction or any negative effects brought on by the use of drugs or alcohol.

(4) "Distressed area" means: (a) A rural county; (b) a metropolitan statistical area, as defined by the office of federal statistical policy and standards, United States department of commerce, in which the average level of unemployment for the calendar year immediately preceding the year in which an application is filed under this chapter exceeds the average state unemployment for such calendar year by twenty percent; (c) an area within a county, which area: (i) Is composed of contiguous census tracts; (ii) has a minimum population of five thousand persons; (iii) has at least seventy percent of its families and unrelated individuals with incomes below eighty percent of the county's median income for families and unrelated individuals; and (iv) has an unemployment rate which is at least forty percent higher than the county's unemployment rate; or (d) a county designated as a rural natural resources impact area under RCW 43.31.601. For purposes of this subsection, "families and unrelated individuals" has the same meaning that is ascribed to that term by the federal department of housing and urban development in its regulations authorizing action grants for economic development and neighborhood revitalization projects.

(5) "Fund" means the rural Washington loan fund.

(6) "Local development organization" means a nonprofit organization which is organized to operate within an area, demonstrates a commitment to a long-standing effort for an economic development program, and makes a demonstrable effort to assist in the employment of unemployed or underemployed residents in an area.

(7) "Project" means the establishment of a new or expanded business in an area, which business, when completed, will provide employment opportunities. "Project" also means the retention of an existing business in an area, which business, when completed, will provide employment opportunities.

(8) "Rural county" means a county with a population density of fewer than one hundred persons per square mile, as determined by the office of financial management.

NEW SECTION. Sec. 503. Subject to the restrictions contained in this chapter, the department is authorized to approve applications of local governments for federal community development block grant funds or other federal funds which the local governments would use to make loans to finance business projects within their jurisdictions. Applications approved by the department under this chapter must conform to applicable federal requirements.

NEW SECTION. Sec. 504. (1) The department may approve an application providing a loan for a project only if the department finds that the project:

(a) Will result in creation of employment opportunities, maintenance of threatened employment, or development or expansion of business ownership by disabled persons, minorities, and women;

(b) Has been approved by the director as conforming to federal rules and regulations governing the spending of federal community development block grant funds or other applicable federal funds;

(c) Will be of public benefit and for a public purpose, and that the benefits, including increased or maintained employment, improved standard of living, employment of disadvantaged workers, and development or expansion of business ownership by disabled persons, minorities, and women, will primarily accrue to residents of the area;

(d) Will probably be successful;

(e) Would probably not be completed without the loan because other capital or financing at feasible terms is unavailable, or because the return on investment is inadequate.

(2)(a) The department shall, subject to applicable federal funding criteria, give priority to applications that capitalize or recapitalize an existing or new local revolving loan fund based on criteria established by the department.

(b) The department shall, subject to applicable federal funding criteria, give higher priority to economic development projects that contain provisions for child care.

(3) The department may not approve an application that fails to provide for adequate reporting or disclosure of financial data to the department. The department may require an annual or other periodic audit of the project books.

(4) The department may require that the project be managed in whole or in part by a local development organization and may prescribe a management fee to be paid to that organization by the recipient of the loan or grant.

(5) The department shall fix the terms and rates pertaining to its loans.

(6) If there is more demand for loans than funds available for lending, the department shall provide loans for those projects which will lead to the greatest amount of employment or benefit to a community. In determining the "greatest amount of employment or benefit," the department shall also consider the employment which would be saved by its loan and the benefit relative to the community, not just the total number of new jobs or jobs saved.

(7) To the extent permitted under federal law, the department shall require applicants to provide for the transfer of all payments of principal and interest on loans to the rural Washington loan fund created under this chapter. Under circumstances where federal law does not permit the department to require the transfer, the department shall give priority to applicants who on their own volition make commitments to provide for the transfer.

(8) The department shall not approve any application to finance or help finance a shopping mall.

(9) For loans not made to minority and women-owned businesses and businesses owned by disabled persons, the department shall make at least eighty percent of the appropriated funds available to projects located in distressed areas, and may make up to twenty percent available to projects located in areas not designated as distressed.

(10) If an objection is raised to a project on the basis of unfair business competition, the department shall evaluate the potential impact of a project on similar businesses located in the local market area. The department may deny a grant if the department determines the proposed project is not likely to result in a net increase in employment within a local market area.

(11) For loans to minority and women-owned businesses and businesses owned by disabled persons that do not meet the credit criteria, the department may consider nontraditional credit standards to offset past discrimination that has precluded full participation of minority or women-owned businesses or businesses owned by disabled persons in the economy. For applicants with high potential who do not meet the credit criteria, the department shall consider developing alternative borrowing methods. For applicants denied loans due to credit problems, the department shall provide financial counseling within available resources and provide referrals to credit rehabilitation services. In circumstances of competing applications, the department shall give priority to members of eligible groups which previously have been least served by this fund.

NEW SECTION. Sec. 505. The department is encouraged to work with local development organizations to promote applications for loans by the fund. The department shall also provide assistance to local development organizations and local governments to identify viable projects for consideration by the department. The department shall provide technical assistance to organizations that administer local revolving loan funds regarding practices to establish sustainable operations. The department shall adopt such rules and regulations as are appropriate to carry out its authority under this chapter.

NEW SECTION. Sec. 506. The department may receive and approve applications on a monthly basis but shall receive and approve applications on at least a quarterly basis for each fiscal year. The department shall make every effort to simplify the loan process for applicants. Department staff shall process and assist in the preparation of applications. Each application shall show in detail the nature of the project, the types and numbers of jobs to be created, wages to be paid to new employees, and methods of hiring unemployed persons from the local market area. Each application must contain a credit analysis of the business to receive the loan.

NEW SECTION. Sec. 507. The department shall make available an amount of federal community development block grant funds equal to the amount of state funds transferred or appropriated to the department for purposes of supplementing the department's block grant funds.

NEW SECTION. Sec. 508. The department may make grants of state funds to local governments that qualify as "entitlement communities" under the federal law authorizing community development block grants. These grants may be made only on condition that the entitlement community provide the department with assurances that the entitlement community will: (1) Spend the grant moneys for purposes and in a manner satisfying state constitutional requirements; (2) spend the grant moneys for purposes and in a manner satisfying federal requirements; and (3) spend at least the same amount of the grant for loans to businesses from the federal funds received by the entitlement community.

NEW SECTION. Sec. 509. There is established the rural Washington loan fund, which shall be an account in the state treasury. The rural Washington loan fund shall include revenue from the sources established by this chapter, appropriations by the legislature, federal funds, private contributions, all loan payments of principal and interest that are transferred under section 504 of this act, and all other sources. Moneys in the account may be spent only after legislative appropriation for loans or grants under this chapter. Any expenditures of federal moneys must conform to applicable federal law.

NEW SECTION. Sec. 510. (1) The department shall develop guidelines for rural Washington loan funds to be used to fund local economic development revolving loan funds. The department shall consider the selection process for grantees, loan quality criteria, legal and regulatory issues, and ways to minimize duplication between development loan funds and local economic development revolving loan funds.

(2) The department may make loans or grants from the rural Washington loan fund to local governments to capitalize new, or to recapitalize existing, economic development revolving loan funds in distressed areas.

NEW SECTION. Sec. 511. The department shall develop performance standards for judging the effectiveness of the program including, to the extent possible, examining the effectiveness of loans or grants with regard to:

(1) Creation of jobs for individuals of low and moderate income;

(2) Retention of existing employment;

(3) Creation of new employment opportunities;

(4) Diversification of the economic base of local communities;

(5) Establishment of employee cooperatives;

(6) Providing assistance in cases of employee buyouts of firms to prevent the loss of existing employment;

(7) The degree of risk assumed by the rural Washington loan fund, with emphasis on loans which did not receive financing from commercial lenders, but which are considered financially sound.

NEW SECTION. Sec. 512. Any funds appropriated by the legislature to the rural Washington loan fund for purposes of the timber recovery act shall be used for development loans in rural natural resources impact areas as defined in RCW 43.31.601.

NEW SECTION. Sec. 513. Subject to the restrictions contained in this chapter, the department is authorized to approve applications of minority and women-owned businesses for loans or loan guarantees from the fund. Applications approved by the department under this chapter must conform to applicable federal requirements. The department shall prioritize available funds for loan guarantees rather than loans when possible. The department may enter into agreements with other public or private lending institutions to develop a joint loan guarantee program for minority and women-owned businesses. If such a program is developed, the department may provide funds, in conjunction with the other organizations, to operate the program. This section does not preclude the department from making individual loan guarantees.

To the maximum extent practicable, the department shall make available to minority and women-owned businesses, on an equal basis, funds available under this section. The department shall submit to the appropriate committees of the senate and house of representatives quarterly reports that detail the number of loans approved and the characteristics of the recipients by ethnic and gender groups.

NEW SECTION. Sec. 514. The department may receive gifts, grants, or endowments from public or private sources that are made from time to time, in trust or otherwise, for the use and benefit of the purposes of this chapter, and the department may spend gifts, grants, or endowments or income from the public or private sources according to their terms, unless the receipt of the gifts, grants, or endowments violates RCW 42.17.710.

PART VI

REPEALED SECTIONS

Sec. 601. RCW 43.131.386 and 1997 c 367 s 19 are each amended to read as follows:

The following acts or parts of acts, as now existing or hereafter amended, are each repealed, effective June 30, 2001:

(1) RCW 43.31.601 and 1997 c 367 s 1, 1995 c 226 s 1, 1992 c 21 s 2, & 1991 c 314 s 2;

(2) RCW 43.31.641 and 1997 c 367 s 6, 1995 c 226 s 4, 1993 c 280 s 50, & 1991 c 314 s 7;

(3) RCW 50.22.090 and ((~~1995 c 226 s 5, 1993 c 316 s 10, 1992 c 47 s 2, & 1991 c 315 s 4~~)) 1997 c 367 s 4;

(4) ((~~RCW 43.160.212 and 1996 c 168 s 4, 1995 c 226 s 6, & 1993 c 316 s 5;~~

~~(5)~~)) RCW 43.63A.021 and 1997 c 367 s 5 & 1995 c 226 s 11;

((~~(6)~~)) (5) RCW 43.63A.600 and 1995 c 226 s 12, 1994 c 114 s 1, 1993 c 280 s 77, & 1991 c 315 s 23;

((~~(7)~~)) (6) RCW 43.63A.440 and 1997 c 367 s 7, 1995 c 226 s 13, 1993 c 280 s 74, & 1989 c 424 s 7;

((~~(8) RCW 43.160.200 and 1995 c 226 s 16, 1993 c 320 s 7, 1993 c 316 s 4, & 1991 c 314 s 23;~~

~~(9)~~)) (7) RCW 28B.50.258 and 1995 c 226 s 18 & 1991 c 315 s 16;

((~~(10)~~)) (8) RCW 28B.50.262 and 1995 c 226 s 19 & 1994 c 282 s 3;

((~~(11)~~)) (9) RCW 28B.80.570 and 1997 c 367 s 14, 1995 c 226 s 20, 1992 c 21 s 6, & 1991 c 315 s 18;

((~~(12)~~)) (10) RCW 28B.80.575 and 1995 c 269 s 1001, 1995 c 226 s 21, & 1991 c 315 s 19;

((~~(13)~~)) (11) RCW 28B.80.580 and 1997 c 367 s 15, 1995 c 226 s 22, 1993 sp.s. c 18 s 34, 1992 c 231 s 31, & 1991 c 315 s 20;

((~~(14)~~)) (12) RCW 28B.80.585 and 1995 c 226 s 23 & 1991 c 315 s 21;

((~~(15)~~)) (13) RCW 43.17.065 and 1995 c 226 s 24, 1993 c 280 s 37, 1991 c 314 s 28, & 1990 1st ex.s. c 17 s 77;

((~~(16)~~)) (14) RCW 43.20A.750 and ((~~1995 c 226 s 25, 1993 c 280 s 38, 1992 c 21 s 4, & 1991 c 153 s 28~~)) 1997 c 367 s 16;

((~~(17)~~)) (15) RCW 43.168.140 and 1995 c 226 s 28 & 1991 c 314 s 20;

((~~(18)~~)) (16) RCW 50.12.270 and 1997 c 367 s 17, 1995 c 226 s 30, & 1991 c 315 s 3;

((~~(19)~~)) (17) RCW 50.70.010 and 1995 c 226 s 31, 1992 c 21 s 1, & 1991 c 315 s 5; and

((~~(20)~~)) (18) RCW 50.70.020 and 1995 c 226 s 32 & 1991 c 315 s 6.

NEW SECTION. Sec. 602. RCW 43.160.212 (Rural natural resources impact areas--Loans for public works facilities) and 1996 c 168 s 4, 1995 c 226 s 6, 1993 c 316 s 5, 1992 c 21 s 8, & 1991 c 314 s 26 are each repealed.

NEW SECTION. Sec. 603. 1997 c 367 s 11, 1995 c 226 s 8, 1993 c 316 s 7, & 1991 c 314 s 33 (uncodified) are each repealed.

PART VII

MISCELLANEOUS

NEW SECTION. Sec. 701. Part headings and subheadings used in this act are not any part of the law.

NEW SECTION. Sec. 702. Sections 501 through 514 of this act constitute a new chapter in Title 43 RCW.

NEW SECTION. Sec. 703. This act takes effect August 1, 1999.

NEW SECTION. Sec. 704. 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."

EHB 1313 - S COMM AMD

By Committee on Agriculture & Rural Economic Development

NOT ADOPTED 4/15/99

On page 1, line 1 of the title, after "development;" strike the remainder of the title and insert "amending RCW 43.160.010, 43.160.020, 43.160.060, 43.160.070, 43.160.900, 43.160.200, 43.180.160, 42.52.080, and 43.131.386; reenacting and amending RCW 43.160.076; adding a new section to chapter 43.63A RCW; adding new sections to chapter 43.31 RCW; adding a new chapter to Title 43 RCW; creating new sections; repealing RCW 43.31.855, 43.31.857, and 43.160.212; repealing 1997 c 377 s 3 (uncodified); repealing 1997 c 367 s 11, 1995 c 226 s 8, 1993 c 316 s 7, and 1991 c 314 s 33 (uncodified); providing an effective date; and providing expiration dates."