BILL REQ. #:  H-3278.4 

Read first time 01/11/2006.   Referred to Committee on Finance.

     AN ACT Relating to financing for hospital benefit zones; adding new sections to chapter 82.14 RCW; adding a new section to chapter 82.32 RCW; adding a new chapter to Title 39 RCW; and providing an effective date.

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

NEW SECTION.  Sec. 1   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Benefit zone" means the geographic zone from which taxes are to be appropriated to finance public improvements authorized under this chapter and in which a hospital that has received a certificate of need is to be constructed.
     (2) "Department" means the department of revenue.
     (3) "Local government" means any city, town, county, port district, or any combination thereof.
     (4) "Ordinance" means any appropriate method of taking legislative action by a local government.
     (5) "Participating taxing authority" means a taxing authority that has entered into a written agreement with a local government for the use of hospital benefit zone financing to the extent of allocating excess excise taxes to the local government for the purpose of financing all or a portion of the costs of designated public improvements.
     (6) "Public improvements" means infrastructure improvements within the benefit zone that include:
     (a) Street and road construction and maintenance;
     (b) Water and sewer system construction and improvements;
     (c) Sidewalks and streetlights;
     (d) Parking, terminal, and dock facilities;
     (e) Park and ride facilities of a transit authority;
     (f) Park facilities and recreational areas; and
     (g) Storm water and drainage management systems.
     (7) "Public improvement costs" means the costs of: (a) Design, planning, acquisition including land acquisition, site preparation including land clearing, construction, reconstruction, rehabilitation, improvement, and installation of public improvements; (b) demolishing, relocating, maintaining, and operating property pending construction of public improvements; (c) relocating utilities as a result of public improvements; and (d) financing public improvements, including interest during construction, legal and other professional services, taxes, insurance, principal and interest costs on general indebtedness issued to finance public improvements, and any necessary reserves for general indebtedness; and administrative expenses and feasibility studies reasonably necessary and related to these costs, including related costs that may have been incurred before adoption of the ordinance authorizing the public improvements and the use of hospital benefit zone financing to fund the costs of the public improvements.
     (8) "Tax allocation revenues" means those tax revenues derived from the receipt of excess excise taxes under section 5 of this act and distributed to finance public improvements.
     (9) "Taxing authority" means a governmental entity that imposes a sales or use tax under chapter 82.14 RCW upon the occurrence of any taxable event within a proposed or approved benefit zone.

NEW SECTION.  Sec. 2   A local government may finance public improvements using hospital benefit zone financing subject to the following conditions:
     (1) The local government adopts an ordinance designating a benefit zone within its boundaries and specifying the public improvements proposed to be financed in whole or in part with the use of hospital benefit zone financing;
     (2) The public improvements proposed to be financed in whole or in part using hospital benefit zone financing are expected both to encourage private development within the benefit zone and to support the development of a hospital that has received a certificate of need;
     (3) Private development that is anticipated to occur within the benefit zone, as a result of the public improvements, will be consistent with the county-wide planning policy adopted by the county under RCW 36.70A.210 and the local government's comprehensive plan and development regulations adopted under chapter 36.70A RCW; and
     (4) The governing body of the local government finds that the public improvements proposed to be financed in whole or in part using hospital benefit zone financing are reasonably likely to:
     (a) Increase private investment within the benefit zone;
     (b) Increase employment within the benefit zone; and
     (c) Generate, over the period of time that the local sales and use tax will be imposed under section 7 of this act, state and local sales and use tax revenues that are equal to or greater than the respective state and local contributions made under this chapter.

NEW SECTION.  Sec. 3   (1) Before adopting an ordinance creating the benefit zone, a local government must:
     (a) Obtain written agreement for the use of hospital benefit zone financing to finance all or a portion of the costs of the designated public improvements from any taxing authority that imposes a sales or use tax under chapter 82.14 RCW within the benefit zone if the taxing authority chooses to participate in the public improvements to the extent of providing limited funding under hospital benefit zone financing authorized under this chapter. The agreement must be authorized by the governing body of such participating taxing authorities; and
     (b) Hold a public hearing on the proposed financing of the public improvement in whole or in part with hospital benefit zone financing.
     (i) Notice of the public hearing must be published in a legal newspaper of general circulation within the proposed benefit zone at least ten days before the public hearing and posted in at least six conspicuous public places located in the proposed benefit zone.
     (ii) Notices must describe the contemplated public improvements, estimate the costs of the public improvements, describe the portion of the costs of the public improvements to be borne by hospital benefit zone financing, describe any other sources of revenue to finance the public improvements, describe the boundaries of the proposed benefit zone, and estimate the period during which hospital benefit zone financing is contemplated to be used. The public hearing may be held by either the governing body of the local government, or a committee of the governing body that includes at least a majority of the whole governing body.
     (2) In order to create a benefit zone, a local government must adopt an ordinance establishing the benefit zone that:
     (a) Describes the public improvements;
     (b) Describes the boundaries of the benefit zone;
     (c) Estimates the cost of the public improvements and the portion of these costs to be financed by hospital benefit zone financing;
     (d) Estimates the time during which excess excise taxes are to be used to finance public improvement costs associated with the public improvements financed in whole or in part by hospital benefit zone financing;
     (e) Estimates the average amount of tax revenue to be received in all fiscal years through the imposition of a sales and use tax under section 7 of this act;
     (f) Provides the date when the use of excess excise taxes will commence; and
     (g) Finds that the conditions of section 2 of this act are met.
     (3) For purposes of this section, "fiscal year" means the year beginning July 1st and ending the following June 30th.

NEW SECTION.  Sec. 4   A local government that adopts an ordinance creating a benefit zone under this chapter shall, within ninety days of adopting the ordinance:
     (1) Publish notice in a legal newspaper of general circulation within the benefit zone that describes the public improvement, describes the boundaries of the benefit zone, and identifies the location and times where the ordinance and other public information concerning the public improvement may be inspected; and
     (2) Deliver a certified copy of the ordinance to the county treasurer, the county assessor, the department of revenue, and the governing body of each participating taxing authority within which the benefit zone is located.

NEW SECTION.  Sec. 5   (1) A local government that creates a benefit zone and has received approval from the department under section 9 of this act to impose the local option sales and use tax authorized in section 7 of this act may use annually any excess excise taxes received by it from taxable activity within the benefit zone to finance public improvement costs associated with the public improvements financed in whole or in part by hospital benefit zone financing. The use of excess excise taxes must cease when tax allocation revenues are no longer necessary or obligated to pay the costs of the public improvements. Any participating taxing authority is authorized to allocate excess excise taxes to the local government as long as the local government has received approval from the department under section 9 of this act to impose the local option sales and use tax authorized in section 7 of this act. The legislature declares that it is a proper purpose of a local government or participating taxing authority to allocate excess excise taxes for purposes of financing public improvements under this chapter.
     (2) A local government consisting solely of a port district may use excess excise taxes as provided in this section only to the extent that any participating taxing authority allocates excess excise taxes to the local government.
     (3) A local government consisting of a port district and any city, town, or county may use excess excise taxes as provided in this section only if:
     (a) The city, town, or county realizes excess excise taxes from taxable activity within the benefit zone; or
     (b) Any participating taxing authority allocates excess excise taxes to the local government.
     (4) A local government shall provide the department accurate information describing the geographical boundaries of the benefit zone at least seventy-five days before the effective date of the ordinance creating the benefit zone. The local government shall ensure that the boundary information provided to the department is kept current.
     (5) The department shall provide the necessary information to calculate excess excise taxes to each local government that has provided boundary information to the department as provided in this section and that has received approval from the department under section 9 of this act to impose the local option sales and use tax authorized in section 7 of this act.
     (6) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Base year" means the calendar year immediately preceding the creation of a benefit zone.
     (b) "Excess excise taxes" means the amount of excise taxes received by the local government during the measurement year from taxable activity within the benefit zone over and above the amount of excise taxes received by the local government during the base year from taxable activity within the same area represented by the benefit zone.
     (c) "Excise taxes" means local retail sales and use taxes authorized in RCW 82.14.030.
     (d) "Measurement year" means a calendar year, beginning with the calendar year following the base year and each calendar year thereafter, that is used annually to measure the amount of excess excise taxes required to be used to finance public improvement costs associated with public improvements financed in whole or in part by hospital benefit zone financing.

NEW SECTION.  Sec. 6   (1) A local government may issue revenue bonds to fund public improvements, or portions of public improvements, that are located within a benefit zone and that it is authorized to provide or operate. Whenever revenue bonds are to be issued, the legislative authority of the local government shall create or have created a special fund or funds from which, along with any reserves created pursuant to RCW 39.44.140, the principal and interest on these revenue bonds shall exclusively be payable. The legislative authority of the local government may obligate the local government to set aside and pay into the special fund or funds a fixed proportion or a fixed amount of the revenues obtained from within the benefit zone of the development, construction, operation, and maintenance of businesses supported by the public improvements that are funded by the revenue bonds. This amount or proportion is a lien and charge against these revenues, subject only to operating and maintenance expenses. The local government shall have due regard for the cost of operation and maintenance of the public improvements that are funded by the revenue bonds, and shall not set aside into the special fund or funds a greater amount or proportion of the revenues that in its judgment will be available over and above the cost of maintenance and operation and the amount or proportion, if any, of the revenue previously pledged. The local government may also provide that revenue bonds payable out of the same source or sources of revenue may later be issued on a parity with any revenue bonds being issued and sold.
     (2) Revenue bonds issued pursuant to this section are not an indebtedness of the local government issuing the bonds, and the interest and principal on the bonds shall only be payable from the revenues lawfully pledged to meet the principal and interest requirements and any reserves created pursuant to RCW 39.44.140. The owner or bearer of a revenue bond or any interest coupon issued pursuant to this section shall not have any claim against the local government arising from the bond or coupon except for payment from the revenues lawfully pledged to meet the principal and interest requirements and any reserves created pursuant to RCW 39.44.140. The substance of the limitations included in this subsection shall be plainly printed, written, or engraved on each bond issued pursuant to this section.
     (3) Revenue bonds with a maturity in excess of thirty years shall not be issued. The legislative authority of the local government shall by resolution determine for each revenue bond issue the amount, date, form, terms, conditions, denominations, maximum fixed or variable interest rate or rates, maturity or maturities, redemption rights, registration privileges, manner of execution, manner of sale, callable provisions, if any, and covenants including the refunding of existing revenue bonds. Facsimile signatures may be used on the bonds and any coupons. Refunding revenue bonds may be issued in the same manner as revenue bonds are issued.

NEW SECTION.  Sec. 7   A new section is added to chapter 82.14 RCW to read as follows:
     (1) A city, town, or county that creates a benefit zone and finances public improvements pursuant to chapter 39.-- RCW (sections 1 through 6 of this act) may impose a sales and use tax in accordance with the terms of this chapter and subject to the criteria set forth in this section. Except as provided in this section, the tax is in addition to other taxes authorized by law and shall be collected from those persons who are taxable by the state under chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the taxing jurisdiction of the city, town, or county. The rate of tax shall not exceed the rate provided in RCW 82.08.020(1) in the case of a sales tax or the rate provided in RCW 82.12.020(5) in the case of a use tax, less the aggregate rates of any other taxes imposed on the same events that are credited against the state taxes imposed under chapters 82.08 and 82.12 RCW.
     (2) The tax imposed under subsection (1) of this section shall be deducted from the amount of tax otherwise required to be collected or paid over to the department under chapter 82.08 or 82.12 RCW. The department shall perform the collection of such taxes on behalf of the city, town, or county at no cost to the city, town, or county.
     (3) No tax may be imposed under this section before July 1, 2007. Before imposing a tax under this section, the city, town, or county shall first have received tax allocation revenues derived from excess excise taxes during the preceding twelve months. The tax imposed under this section shall expire when the bonds issued under the authority of chapter 39.-- RCW (sections 1 through 6 of this act) are retired, but not more than thirty years after the tax is first imposed.
     (4) An ordinance adopted by the legislative authority of a city, town, or county imposing a tax under this section shall provide that:
     (a) The tax shall first be imposed on the first day of a fiscal year;
     (b) The amount of tax received by the local government in any fiscal year shall not exceed the amount of the state contribution;
     (c) The tax shall cease to be imposed for the remainder of any fiscal year in which either:
     (i) The amount of tax receipts totals the amount of the state contribution;
     (ii) The amount of tax receipts totals the amount of "local public sources," as that term is used in section 8 of this act, dedicated in the previous calendar year to finance public improvements authorized under chapter 39.-- RCW (sections 1 through 6 of this act); or
     (iii) The amount of revenue from taxes imposed under this section by all cities, towns, and counties totals the annual state credit limit as provided in section 9(3) of this act;
     (d) The tax shall be reimposed, should it cease to be imposed for any of the reasons provided in (c) of this subsection, at the beginning of the next fiscal year, subject to the restrictions in this section; and
     (e) Any revenue generated by the tax in excess of the amounts specified in (a), (b), and (c) of this subsection shall belong to the state of Washington.
     (5) If both a county and a city or town impose a tax under this section, the tax imposed by the city, town, or county shall be credited as follows:
     (a) If the county has created a benefit zone before the city or town, the tax imposed by the county shall be credited against the tax imposed by the city or town, the purpose of such credit is to give priority to the county tax; and
     (b) If the city or town has created a benefit zone before the county, the tax imposed by the city or town shall be credited against the tax imposed by the county, the purpose of such credit is to give priority to the city or town tax.
     (6) The department shall determine the amount of tax receipts attributable to each city, town, and county imposing a sales and use tax under this section and shall advise a city, town, or county when it must cease imposing the tax for the remainder of the fiscal year as provided in subsection (4)(c) of this section. Determinations by the department of the amount of taxes attributable to a city, town, or county are final and shall not be used to challenge the validity of any tax imposed under this section. The department shall remit any tax receipts in excess of the amounts specified in subsection (4)(a), (b), and (c) of this section to the state treasurer who shall deposit the moneys in the general fund.
     (7) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Base year" means the calendar year immediately preceding the creation of a benefit zone.
     (b) "Benefit zone" has the same meaning as provided in section 1 of this act.
     (c) "Excess excise taxes" has the same meaning as provided in section 5 of this act.
     (d) "Excess state excise taxes" means the amount of excise taxes received by the state during the measurement year from taxable activity within the benefit zone over and above the amount of excise taxes received by the state during the base year from taxable activity within the same area represented by the benefit zone.
     (e) "Excise taxes" means the state retail sales and use taxes imposed under chapters 82.08 and 82.12 RCW.
     (f) "Fiscal year" has the same meaning as provided in section 3 of this act.
     (g) "Measurement year" means a calendar year, beginning with the calendar year following the base year and each calendar year thereafter, that is used annually to measure the amount of excess excise taxes required to be used to finance public improvement costs associated with public improvements financed in whole or in part by hospital benefit zone financing.
     (h) "State contribution" means the lesser of two million dollars or an amount equal to excess state excise taxes received by the state during the preceding calendar year.
     (i) "Tax allocation revenues" has the same meaning as provided in section 1 of this act.

NEW SECTION.  Sec. 8   A new section is added to chapter 82.14 RCW to read as follows:
     (1) Moneys collected from the taxes imposed under section 7 of this act shall be used only for the purpose of principal and interest payments on bonds issued under the authority of section 6 of this act and must be matched with an amount from local public sources dedicated through December 31st of the previous calendar year to finance public improvements authorized under chapter 39.-- RCW (sections 1 through 6 of this act). Such local public sources include but are not limited to private monetary contributions and tax allocation revenues. Local public sources are dedicated to finance public improvements if they are actually expended to pay public improvement costs or are required by law or an agreement to be used exclusively to pay public improvement costs.
     (2) A local government shall inform the department by the first day of March of the amount of local public sources dedicated in the preceding calendar year to finance public improvements authorized under chapter 39.-- RCW (sections 1 through 6 of this act).
     (3) If a local government fails to comply with subsection (2) of this section, no tax may be imposed under section 7 of this act in the subsequent fiscal year.
     (4) A local government shall provide a report to the department by March 1st of each year. The report shall contain the following information:
     (a) The amount of tax allocation revenues, taxes under section 7 of this act, and local public sources received by the local government during the preceding calendar year, and a summary of how these revenues were expended;
     (b) The names of any businesses locating within the benefit zone as a result of the public improvements undertaken by the local government and financed in whole or in part with hospital benefit zone financing;
     (c) The total number of permanent jobs created as a result of the public improvements undertaken by the local government and financed in whole or in part with hospital benefit zone financing; and
     (d) The average wages and benefits received by all employees of businesses locating within the benefit zone as a result of the public improvements undertaken by the local government and financed in whole or in part with hospital benefit zone financing.
     (5) The department shall make a report available to the public and the legislature by June 1st of each year. The report shall include a list of public improvements undertaken by local governments and financed in whole or in part with hospital benefit zone financing, and it shall also include a summary of the information provided to the department by local governments under subsection (4) of this section.
     (6) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Public improvement costs" has the same meaning as in section 1 of this act.
     (b) "Tax allocation revenues" has the same meaning as provided in section 1 of this act.

NEW SECTION.  Sec. 9   A new section is added to chapter 82.32 RCW to read as follows:
     (1) As a condition to imposing a sales and use tax under section 7 of this act, a city, town, or county must apply to the department at least seventy-five days before the effective date of any such tax. The application shall be in a form and manner prescribed by the department and shall include but is not limited to information establishing that the applicant is eligible to impose such a tax, the anticipated effective date for imposing the tax, the estimated number of years that the tax will be imposed, and the estimated amount of tax revenue to be received in each fiscal year that the tax will be imposed. For purposes of this section, "fiscal year" means the year beginning July 1st and ending the following June 30th. The department shall make available forms to be used for this purpose. As part of the application, a city, town, or county must provide to the department a copy of the ordinance creating the benefit zone as required in section 4 of this act. The department shall rule on completed applications within sixty days of receipt. The department may begin accepting and approving applications August 1, 2006. No new applications shall be considered by the department after the thirtieth day of September of the third year following the year in which the first application was received by the department.
     (2) The authority to impose the local option sales and use taxes under section 7 of this act is on a first-come basis. Priority for collecting the taxes authorized under section 7 of this act among approved applicants shall be based on the date that the approved application was received by the department. As a part of the approval of applications under this section, the department shall approve the amount of tax under section 7 of this act that an applicant may impose. The amount of tax approved by the department shall not exceed the lesser of two million dollars or the average amount of tax revenue that the applicant estimates that it will receive in all fiscal years through the imposition of a sales and use tax under section 7 of this act. A city, town, or county shall not receive, in any fiscal year, more revenues from taxes imposed under section 7 of this act than the amount approved by the department. The department shall not approve the receipt of more credit against the state sales and use tax than is authorized under subsection (3) of this section.
     (3) No more than two million dollars of credit against the state sales and use tax may be received by all cities, towns, and counties imposing a tax under section 7 of this act.
     (4) The credit against the state sales and use tax shall be available to any city, town, or county imposing a tax under section 7 of this act only as long as the city, town, or county has outstanding indebtedness under section 7 of this act.
     (5) The department may adopt any rules under chapter 34.05 RCW it considers necessary for the administration of chapter 39.-- RCW (sections 1 through 6 of this act).

NEW SECTION.  Sec. 10   Sections 1 through 6 of this act constitute a new chapter in Title 39 RCW.

NEW SECTION.  Sec. 11   This act takes effect July 1, 2006.