BILL REQ. #:  H-3953.1 

Read first time 01/11/2006.   Referred to Committee on Economic Development, Agriculture & Trade.

     AN ACT Relating to creating the local infrastructure financing tool demonstration program; adding a new section to chapter 82.14 RCW; adding a new chapter to Title 39 RCW; creating new sections; providing an effective date; and providing an expiration date.

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

NEW SECTION.  Sec. 101   INTENT. The legislature recognizes that the state as a whole benefits from investment in public infrastructure because it promotes community and economic development. Public investment stimulates business activity and helps create jobs; stimulates the redevelopment of brownfields and blighted areas in the inner city; lowers the cost of housing; and promotes efficient land use. The legislature finds that these activities generate revenue for the state and that it is in the public interest to invest in these projects through a credit against the state sales and use tax and an allocation of property tax revenue to those local governments that can demonstrate the expected returns to the state.

NEW SECTION.  Sec. 102   DEFINITIONS. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
      (1) "Accrued value" means seventy-five percent of any increase in the assessed value of real property in a revenue development area due to the placement of new construction and improvements to property on the assessment rolls after the revenue development area is created, where the new construction or improvements occur entirely after the revenue development area is created. "Accrued value" does not include any increase in the assessed value of real property representing new construction and improvements to property occurring after their initial placement on the assessment rolls, except that for new construction which represents entire buildings, "accrued value" includes seventy-five percent of any increase in assessed value of such new construction in the years following its initial placement on the assessment rolls. There is no accrued value if the assessed value of real property in a revenue development area has not increased due to new construction and improvements to property occurring after the revenue development area is created.
     (2) "Assessed value" means the valuation of taxable real property as placed on the last completed assessment roll.
     (3) "Base year" means the first calendar year following the creation of a revenue development area.
     (4) "Demonstration project" means one of the following projects:
     (a) Port of Walla Walla RailEx infrastructure project;
     (b) Bellingham waterfront redevelopment project;
     (c) Covington elementary school redevelopment project;
     (d) Grays Harbor biomass plant project;
     (e) Gig Harbor St. Anthony's hospital and retail area infrastructure project;
     (f) Bothell gateway project.
     (5) "Department" means the department of revenue.
     (6) "Excess excise taxes" means the amount of excise taxes received by the local government during the measurement year from taxable activity within the revenue development area over and above the amount of excise taxes received by the local government during the base year from taxable activity within the revenue development area. However, if a local government creates a revenue development area and reasonably determines that no activity subject to tax under chapters 82.08 and 82.12 RCW occurred in the twelve months immediately preceding the creation of the revenue development area within the boundaries of the area that became the revenue development area, "excess excise taxes" means the entire amount of excise taxes received by the local government during a calendar year period beginning with the calendar year immediately following the creation of the revenue development area and continuing with each measurement year thereafter.
     (7) "Excise taxes" means local retail sales and use taxes authorized in RCW 82.14.030.
     (8) "Fiscal year" means the twelve-month period beginning July 1st and ending the following June 30th.
     (9) "Local government" means any city, town, county, port district, or combination thereof that has a demonstration project located within it.
     (10) "Local public sources" means funds allocated by the local government to finance the public improvements financed by local infrastructure financing and may 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 expended to pay public improvement costs or are required by law or an agreement to be used exclusively to pay public improvement costs.
     (11) "Low-income housing" has the same meaning as "housing units" within the context of RCW 43.185.050(2)(j).
     (12) "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 local infrastructure financing.
     (13) "Ordinance" means any appropriate method of taking legislative action by a local government.
     (14) "Participating taxing authority" means a taxing authority with jurisdiction over the demonstration project and that has entered into a written agreement with a local government for the use of local infrastructure financing to finance all or a portion of the costs of designated public improvements.
     (15) "Public improvements" means:
     (a) Infrastructure improvements within the revenue development area that include:
     (i) Street and road construction and maintenance;
     (ii) Water and sewer system construction and improvements;
     (iii) Sidewalks and streetlights;
     (iv) Parking, terminal, and dock facilities;
     (v) Park and ride facilities of a transit authority;
     (vi) Park facilities and recreational areas; and
     (vii) Storm water and drainage management systems; and
     (b) Expenditures for facilities and improvements that support affordable housing as defined in RCW 43.63A.510.
     (16) "Public improvement costs" means the cost 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; (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; (e) assessments incurred in revaluing real property for the purpose of determining the tax allocation base value that are in excess of costs incurred by the assessor in accordance with the revaluation plan under chapter 84.41 RCW, and the costs of apportioning the taxes and complying with this chapter and other applicable law; and (f) 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 local infrastructure financing to fund the costs of the public improvements.
     (17) "Regular property taxes" means regular property taxes as defined in RCW 84.04.140, except: (a) Regular property taxes levied by port districts or public utility districts specifically for the purpose of making required payments of principal and interest on general indebtedness; (b) regular property taxes levied by the state for the support of the common schools under RCW 84.52.065; and (c) regular property taxes levied under the authority of RCW 84.55.050 that are limited to a specific purpose as provided in RCW 84.55.050(3)(c). "Regular property taxes" do not include excess property tax levies that are exempt from the aggregate limits for junior and senior taxing districts as provided in RCW 84.52.043.
     (18) "Relocating a business" means the closing of a business and the reopening of that business, or the opening of a new business that engages in the same activities as the previous business, in a different location within a one-year period, when an individual or entity has an ownership interest in the business at the time of closure and at the time of opening or reopening. "Relocating a business" does not include the closing and reopening of a business in a new location where the business has been acquired and is under entirely new ownership at the new location, or the closing and reopening of a business in a new location as a result of the exercise of the power of eminent domain.
     (19) "Revenue development area" means the geographic area from which taxes are to be appropriated to finance public improvements authorized under this chapter.
     (20) "Small business" has the same meaning as provided in RCW 19.85.020.
     (21) "State contribution" means the lesser of one million dollars or an amount equal to:
     (a) State property tax allocation revenues received by the state during the preceding calendar year; and
     (b) Excess state excise taxes received by the state during the preceding calendar year.
     (22) "State property tax allocation revenues" means those tax revenues derived from the imposition of property taxes levied by the state for the support of common schools under RCW 84.52.065 on the accrued value.
     (23) "Tax allocation base value" means the assessed value of real property located within a revenue development area for taxes levied in the year in which the revenue development area is created for collection in the following year, plus one hundred percent of any increase in the assessed value of real property located within a revenue development area that is placed on the assessment rolls after the revenue development area is created, less the accrued value.
     (24) "Tax allocation revenues" means those tax revenues derived from the receipt of excess excise taxes and from regular property taxes on the accrued value and distributed to finance the public improvements.
     (25) "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 revenue development area.
     (26) "Taxing district" means a government entity that levies or has levied for it regular property taxes upon real property located within a proposed or approved revenue development area.
     (27) "Urban growth area" has the same meaning as provided in chapter 36.70A RCW.

NEW SECTION.  Sec. 201   CREATION OF THE LOCAL INFRASTRUCTURE FINANCING TOOL DEMONSTRATION PROGRAM. The local infrastructure financing tool demonstration program is created to assist local governments finance authorized public infrastructure projects designed to promote economic development in the jurisdiction. The local infrastructure financing tool demonstration program is not created to enable existing Washington-based businesses from outside the revenue development area to relocate into the revenue development area.

NEW SECTION.  Sec. 202   LIMITATIONS ON REVENUE DEVELOPMENT AREAS. The designation of a revenue development area is subject to the following limitations:
     (1) The taxable real property within the revenue development area boundaries may not exceed one billion dollars in assessed value;
     (2) The average assessed value per square foot of taxable land within the revenue development area boundaries may not exceed seventy dollars;
     (3) A revenue development area is limited to contiguous tracts, lots, pieces, or parcels of land;
     (4) The boundaries may not be drawn to purposely exclude parcels where economic growth is unlikely to occur;
     (5) A revenue development area must be located in the demonstration project area; and
     (6) A revenue development area cannot comprise an area containing more than twenty-five percent of the total assessed value of the taxable real property within the boundaries of the local government creating the revenue development area.

NEW SECTION.  Sec. 203   CONDITIONS. Local infrastructure financing under this chapter is subject to the following conditions:
     (1)(a) No funds may be used to finance, design, acquire, construct, equip, operate, maintain, remodel, repair, or reequip public facilities funded with taxes collected under RCW 82.14.048;
     (b) Local infrastructure financing funds may not be used to displace other sources of funding that historically have been dedicated to or allocated for public improvement costs;
     (2)(a) Except as provided in (b) of this subsection (2) no funds may be used for public improvements other than projects identified within the capital facilities, utilities, housing, or transportation element of a comprehensive plan required under chapter 36.70A RCW;
     (b) Funds may be used for public improvements that are historical preservation activities as defined in RCW 39.89.020;
     (3) No funds may be used to support projects where the primary purpose is the development of commercial or office space, hotel or convention centers, sports or entertainment complexes, industrial parks, or retail or shopping centers;
     (4) The public improvements proposed to be financed in whole or in part using local infrastructure financing are expected to encourage private development within the revenue development area and to increase the fair market value of real property within the revenue development area;
     (5) The local government has entered or expects to enter into a contract with a private developer relating to the development of private improvements within the revenue development area or has received a letter of intent from a private developer relating to the developer's plans for the development of private improvements within the revenue development area;
     (6) Private development that is anticipated to occur within the revenue development area, as a result of the public improvements, will be consistent with the countywide 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;
     (7) The governing body of the local government must make a finding that local infrastructure financing will:
     (a) Not be used for the purpose of relocating a business from outside the revenue development area, but within this state, into the revenue development area; and
     (b) Improve the viability of existing business entities within the revenue development area;
     (8) The governing body of the local government finds that the public improvements proposed to be financed in whole or in part using local infrastructure financing are reasonably likely to:
     (a) Increase private investment within the revenue development area;
     (b) Increase employment within the revenue development area; and
     (c) Generate, over the period of time that the local sales and use tax will be imposed under section 401 of this act, state and local property, sales, and use tax revenues that are equal to or greater than the respective state and local contributions made under this chapter;
     (9) The local government may only use local infrastructure financing in areas within boundaries of the local government deemed in need of economic development or redevelopment, and absent the financing available under this chapter the proposed economic development or redevelopment would not occur.

NEW SECTION.  Sec. 204   PROCESS. Before adopting an ordinance creating the revenue development area, a local government must:
     (1) Obtain written agreement for the use of the local infrastructure financing to finance all or a portion of the costs of the designated public improvements from any taxing district that levies regular property taxes on real property within the revenue development area, or from any taxing authority that imposes a sales or use tax under chapter 82.14 RCW within the revenue development area if the taxing district or taxing authority chooses to participate in the public improvements to the extent of providing limited funding under local infrastructure financing authorized under this chapter. The agreement must be authorized by the governing body of such participating taxing districts and taxing authorities.
     (2) Estimate the impact of the revenue development area on small business and low-income housing and develop a mitigation plan for the impacted businesses and housing. In analyzing the impact of the revenue development area, the local government must develop:
     (a) An inventory of existing low-income housing units, and businesses and retail activity within the revenue development area;
     (b) A reasonable estimate of the number of low-income housing units, small businesses, and other commercial activity that may be vulnerable to displacement within the revenue development area;
     (c) A reasonable estimate of projected net job growth and net housing growth caused by creation of the revenue development area when compared to the existing jobs or housing balance for the area; and
     (d) A reasonable estimate of the impact of net housing growth on the current housing price mix.

NEW SECTION.  Sec. 205   ORDINANCE. (1) To create a revenue development area, a local government must adopt an ordinance establishing the revenue development area that:
     (a) Describes the public improvements;
     (b) Describes the boundaries of the revenue development area, subject to the limitations in section 202 of this act;
     (c) Estimates the cost of the public improvements and the portion of these costs to be financed by local infrastructure financing;
     (d) Estimates the time during which regular property taxes are to be apportioned and, if applicable, excess excise taxes are to be used to finance public improvement costs associated with the public improvements financed in whole or in part by local infrastructure financing;
     (e) Provides the date when the apportionment of the regular property taxes and, if applicable, the use of excess excise taxes will commence; and
     (f) Finds that the conditions of section 203 of this act are met.
     (2) The local government must hold a public hearing on the proposed financing of the public improvements in whole or in part with local infrastructure financing at least sixty days before passage of the ordinance establishing the revenue development area. The public hearing may be held by either the governing body of the local government, or by a committee of that governing body that includes at least a majority of the whole governing body. The public hearing is subject to the notice requirements in section 206 of this act.

NEW SECTION.  Sec. 206   NOTICE REQUIREMENTS. Prior to adopting the ordinance creating the revenue development area, a local government must provide public notice.
     (1) Notice of the public hearing must be published in a legal newspaper of general circulation within the proposed revenue development area at least ten days before the public hearing and posted in at least six conspicuous public places located in the proposed revenue development area.
     (2) Notice must also be sent by United States mail to the property owners, all identifiable community-based organizations with involvement in the proposed revenue development area, and the business enterprises located within the proposed revenue development area at least thirty days prior to the hearing. In implementing provisions under this chapter, the local governing body may also consult with community-based groups, business organizations, including the local chamber of commerce, and the office of minority and women's business enterprises to assist with providing appropriate notice to business enterprises and property owners for whom English is a second language.
     (3) 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 local infrastructure financing, describe any other sources of revenue to finance the public improvements, describe the boundaries of the proposed revenue development area, estimate the impact that the public improvements will have on small businesses and low-income housing, and estimate the period during which local infrastructure financing is contemplated to be used.
     (4) Notices must inform the public where to obtain the analyses required in this chapter.
     (5) The local government shall deliver a certified copy of the ordinance to the county treasurer, the county assessor, and the governing body of each participating taxing district within which the revenue development area is located.

NEW SECTION.  Sec. 301   REGULAR PROPERTY TAXES. (1) Commencing in the second calendar year following the passage of the ordinance creating a revenue development area and authorizing the use of local infrastructure financing, the county treasurer shall distribute receipts from regular taxes imposed on real property located in the revenue development area as follows:
     (a) Each participating taxing district and the local government that created the revenue development area shall receive that portion of its regular property taxes produced by the rate of tax levied by or for the taxing district on the tax allocation base value for that community local infrastructure financing project in the taxing district, or upon the total assessed value of real property in the taxing district, whichever is smaller; and
     (b) The local government that created the revenue development area shall receive an additional portion of the regular property taxes levied by it and by or for each participating taxing district upon the accrued value within the revenue development area. However, if there is no accrued value, the local government shall not receive any additional regular property taxes under this subsection (1)(b). The local government that created the revenue development area may agree to receive less than the full amount of the additional portion of regular property taxes under this subsection (1)(b) as long as bond debt service, reserve, and other bond covenant requirements are satisfied, in which case the balance of these tax receipts shall be allocated to the participating taxing districts that levied regular property taxes, or have regular property taxes levied for them, in the revenue development area for collection that year in proportion to their regular tax levy rates for collection that year. The local government may request that the treasurer transfer this additional portion of the property taxes to its designated agent. The portion of the tax receipts distributed to the local government or its agent under this subsection (1)(b) may only be expended to finance public improvement costs associated with the public improvements financed in whole or in part by local infrastructure financing.
     (2) The county assessor shall allocate any increase in the assessed value of real property occurring in the revenue development area to the accrued value and tax allocation base value as appropriate. This section does not authorize revaluations of real property by the assessor for property taxation that are not made in accordance with the assessor's revaluation plan under chapter 84.41 RCW or under other authorized revaluation procedures.
     (3) The apportionment of increases in assessed valuation in a revenue development area, and the associated distribution to the local government of receipts from regular property taxes that are imposed on the accrued value, must cease when tax allocation revenues are no longer necessary or obligated to pay the costs of the public improvements. Any excess tax allocation revenues derived from regular property taxes and earnings on these tax allocation revenues, remaining at the time the apportionment of tax receipts terminates, must be returned to the county treasurer and distributed to the participating taxing districts that imposed regular property taxes, or had regular property taxes imposed for it, in the revenue development area for collection that year, in proportion to the rates of their regular property tax levies for collection that year.

NEW SECTION.  Sec. 302   EXCESS EXCISE TAX. (1) A local government that creates a revenue development area and has received approval from the department under section 404 of this act to impose the local option sales and use tax authorized in section 401 of this act may use annually any excess excise taxes received by it from taxable activity within the increment area to finance its costs associated with public improvements in the revenue development area financed in whole or in part by local infrastructure 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 404 of this act to impose the local option sales and use tax authorized in section 401 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 revenue development area; 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 revenue development area at least seventy-five days before the effective date of the ordinance creating the revenue development area. The local government shall ensure that the boundary information provided to the department is kept current.
     (5) The department shall provide 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 404 of this act to impose the local option sales and use tax authorized in section 401 of this act with the necessary information to calculate excess excise taxes.

NEW SECTION.  Sec. 401   A new section is added to chapter 82.14 RCW to read as follows:
     SALES AND USE TAX. (1) A city, town, or county that creates a revenue development area and finances public improvements pursuant to 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 January 1, 2007. Before imposing a tax under this section, the city, town, or county shall first have received tax allocation revenues derived from either regular property taxes or excess excise taxes, or both, during the preceding calendar year. The tax imposed under this section shall expire when the bonds issued under the authority 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 102(10) of this act, dedicated in the previous calendar year to finance public improvements authorized under 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 404 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 (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 revenue development area 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 revenue development area 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) 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)(c) of this section to the state treasurer who shall deposit the moneys in the general fund.
     (7) The definitions in section 102 of this act apply to this section unless the context clearly requires otherwise.

NEW SECTION.  Sec. 402   USE OF FUNDS. (1) Money collected from the taxes imposed under section 401 of this act shall be used only for the purpose of principal and interest payments on bonds issued under the authority of section 501 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 this chapter. 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:
     (a) Local public sources dedicated in the preceding calendar year to finance public improvements authorized under this chapter; and
     (b) Tax allocation revenues derived in the preceding calendar year from the imposition of regular property taxes on the accrued value and distributed to finance public improvements. Upon request of a local government, the county assessor shall assist the local government in determining the amount of tax allocation revenues derived in the preceding calendar year and distributed to finance public improvements.
     (3) If a local government fails to comply with subsection (2) of this section, no tax may be imposed under section 401 of this act in the subsequent fiscal year.

NEW SECTION.  Sec. 403   REPORTING REQUIREMENTS. (1) 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 401 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 revenue development area as a result of the public improvements undertaken by the local government and financed in whole or in part with local infrastructure 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 local infrastructure financing;
     (d) The average wages and benefits received by all employees of businesses locating within the revenue development area as a result of the public improvements undertaken by the local government and financed in whole or in part with local infrastructure financing; and
     (e) That the local government is in compliance with section 203 of this act.
     (2) 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 local infrastructure financing, and it shall also include a summary of the information provided to the department by local governments under subsection (1) of this section.
     (3) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Public improvement costs" has the same meaning as provided in section 102 of this act.
     (b) "Tax allocation revenues" has the same meaning as provided in section 102 of this act.

NEW SECTION.  Sec. 404   APPLICATION. (1) As a condition to imposing a sales and use tax under section 401 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 revenue development area as required in section 205 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 September 30, 2008.
     (2) The department shall approve the amount of tax under section 401 of this act that an applicant may impose. The amount of tax approved by the department shall not exceed the lesser of one 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 401 of this act. A city, town, or county shall not receive, in any fiscal year, more revenues from taxes imposed under section 401 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) The amount of credit against the state sales and use tax is limited to not more than five million dollars of credit against the state sales and use tax that may be received by all cities, towns, and counties imposing a tax under section 401 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 401 of this act only as long as the city, town, or county has outstanding indebtedness under section 501 of this act.
     (5) The department may adopt any rules under chapter 34.05 RCW it considers necessary for the administration of this chapter.

NEW SECTION.  Sec. 501   BOND ISSUANCE. (1) A local government designating a revenue development area and authorizing the use of local infrastructure financing may incur general indebtedness, and issue general obligation bonds, to finance the public improvements and retire the indebtedness in whole or in part from tax allocation revenues it receives, subject to the following requirements:
     (a) The ordinance adopted by the local government creating the revenue development area and authorizing the use of local infrastructure financing indicates an intent to incur this indebtedness and the maximum amount of this indebtedness that is contemplated; and
     (b) The local government includes this statement of the intent in all notices required by section 206 of this act.
     (2) The general indebtedness incurred under subsection (1) of this section may be payable from other tax revenues, the full faith and credit of the local government, and nontax income, revenues, fees, and rents from the public improvements, as well as contributions, grants, and nontax money available to the local government for payment of costs of the public improvements or associated debt service on the general indebtedness.
     (3) In addition to the requirements in subsection (1) of this section, a local government designating a revenue development area and authorizing the use of local infrastructure financing may require the nonpublic participant to provide adequate security to protect the public investment in the public improvement within the revenue development area.
     (4) Bonds issued under this section shall be authorized by ordinance of the local governing body and may be issued in one or more series and shall bear such date or dates, be payable upon demand or mature at such time or times, bear interest at such rate or rates, be in such denomination or denominations, be in such form either coupon or registered as provided in RCW 39.46.030, carry such conversion or registration privileges, have such rank or priority, be executed in such manner, be payable in such medium of payment, at such place or places, and be subject to such terms of redemption with or without premium, be secured in such manner, and have such other characteristics, as may be provided by such ordinance or trust indenture or mortgage issued pursuant thereto.
     (5) The local government may annually pay into a fund to be established for the benefit of bonds issued under this section a fixed proportion or a fixed amount of any tax allocation revenues derived from property or business activity within the revenue development area containing the public improvements funded by the bonds, such payment to continue until all bonds payable from the fund are paid in full. The local government may also annually pay into the fund established in this section a fixed proportion or a fixed amount of any revenues derived from taxes imposed under section 401 of this act, such payment to continue until all bonds payable from the fund are paid in full. Revenues derived from taxes imposed under section 401 of this act are subject to the use restriction in section 402 of this act.
     (6) In case any of the public officials of the local government whose signatures appear on any bonds or any coupons issued under this chapter shall cease to be such officials before the delivery of such bonds, such signatures shall, nevertheless, be valid and sufficient for all purposes, the same as if such officials had remained in office until such delivery. Any provision of any law to the contrary notwithstanding, any bonds issued under this chapter are fully negotiable.
     (7) Notwithstanding subsections (4) through (6) of this section, bonds issued under this section may be issued and sold in accordance with chapter 39.46 RCW.

NEW SECTION.  Sec. 502   USE OF TAX ALLOCATION REVENUE FOR BOND REPAYMENT. A local government that issues bonds under section 501 of this act to finance public improvements may pledge for the payment of such bonds all or part of any tax allocation revenues derived from the public improvements. The local government may also pledge all or part of any revenues derived from taxes imposed under section 401 of this act and held in connection with the public improvements. All of such tax revenues are subject to the use restrictions in sections 402 through 404 of this act.

NEW SECTION.  Sec. 503   BONDS ISSUED NOT AN OBLIGATION OF THE STATE OF WASHINGTON. The bonds issued by a local government under section 501 of this act to finance public improvements shall not constitute an obligation of the state of Washington, either general or special.

NEW SECTION.  Sec. 504   GENERAL INDEBTEDNESS--SECURITY. (1) A local government designating a revenue development area and authorizing the use of local infrastructure financing may incur general indebtedness, and issue general obligation bonds, to finance the public improvements and retire the indebtedness in whole or in part from tax allocation revenues it receives, subject to the following requirements:
     (a) The ordinance adopted by the local government creating the revenue development area and authorizing the use of local infrastructure financing indicates an intent to incur this indebtedness and the maximum amount of this indebtedness that is contemplated; and
     (b) The local government includes this statement of the intent in all notices required by sections 204 and 205 of this act.
     (2) The general indebtedness incurred under subsection (1) of this section may be payable from other tax revenues, the full faith and credit of the local government, and nontax income, revenues, fees, and rents from the public improvements, as well as contributions, grants, and nontax money available to the local government for payment of costs of the public improvements or associated debt service on the general indebtedness.
     (3) In addition to the requirements in subsection (1) of this section, a local government designating a revenue development area and authorizing the use of local infrastructure financing may require the nonpublic participant to provide adequate security to protect the public investment in the public improvement within the revenue development area.

NEW SECTION.  Sec. 505   REVENUE BONDS. (1) A local government may issue revenue bonds to fund revenue-generating public improvements, or portions of public improvements, that are located within a revenue development area. 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 from 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. 601   JOINT LEGISLATIVE AUDIT AND REVIEW COMMITTEE REPORTS. Beginning September 1, 2013, and continuing every five years thereafter, the joint legislative audit and review committee shall submit a report to the appropriate committees of the legislature. The report shall, at a minimum, evaluate the effectiveness of the local infrastructure financing tool program, including a project by project review. The report that is due September 1, 2028, should also include any recommendations regarding whether or not the program should be expanded statewide and what impact the expansion would have on economic development in Washington.

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

NEW SECTION.  Sec. 702   SEVERABILITY. 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. 703   PORT DISTRICTS. Nothing in this act shall be construed to give port districts the authority to impose a sales or use tax under chapter 82.14 RCW.

NEW SECTION.  Sec. 704   EFFECTIVE DATE. This act takes effect July 1, 2006.

NEW SECTION.  Sec. 705   EXPIRATION DATE. This act expires June 30, 2039.

NEW SECTION.  Sec. 706   NEW CHAPTER. Sections 101 through 302 and 402 through 601 of this act constitute a new chapter in Title 39 RCW.