BILL REQ. #:  S-3584.1 

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

     AN ACT Relating to financing local economic development projects; amending RCW 43.163.010; adding a new section to chapter 82.29A RCW; and adding a new chapter to Title 43 RCW.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that, in many areas of the state, the lack of necessary infrastructure and vacant brownfields act as an impediment to economic growth.
     (2) The legislature further finds that public improvements to brownfields, carried out in accordance with local economic development plans, will encourage investment in job-producing private development and will expand the public tax base.
     (3) The legislature intends, through this act, to promote and facilitate the orderly development and economic stability of communities in the state. It is the purpose of this chapter to provide financial resources to assist local jurisdictions in the financing of public improvements which are needed to encourage private development where this development would not otherwise occur due to the presence of contaminated property and other environmental considerations.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Authority" means the Washington economic development finance authority created in chapter 43.163 RCW.
     (2) "Brownfield" means abandoned, idled, or underused property, including industrial and commercial facilities, owned by a local jurisdiction, where expansion or redevelopment is complicated by real or perceived contamination.
     (3) "Cleanup payments" means the payments made by lessees of former brownfield sites as required by section 3 of this act.
     (4) "Leasehold excise tax" means an excise tax imposed under chapter 82.29A RCW on the act or privilege of occupying or using publicly owned real or personal property.
     (5) "Local economic development project" means a project that:
     (a) Promotes economic development and job creation or retention by the private sector; and
     (b) Includes cleanup of publicly owned brownfield sites, including adjacent marine waters, rivers, and lakes, that have been designated a priority for cleanup in a local economic development plan and by the department of ecology.
     (6) "Local economic development project costs" means costs associated with:
     (a) Environmental cleanup, including restoring brownfields and fish habitat;
     (b) Street and road construction and improvements;
     (c) Water and sewer system construction and improvements;
     (d) Land use planning and associated environmental analysis and project design;
     (e) Relocation, maintenance, and operation of property pending construction of the local economic development project;
     (f) Complying with the requirements of this act and other applicable law; and
     (g) Administrative expenditures reasonably necessary and related to these costs.
     (7) "Local jurisdiction" means a county, city, town, or port district.

NEW SECTION.  Sec. 3   (1) Local jurisdictions with local economic development projects approved by the department of community, trade, and economic development as provided under subsection (2) of this section may enter into an agreement with the Washington economic development finance authority regarding the issuance of bonds for the purpose of financing local economic development project costs. The agreement shall require that the local jurisdiction: (a) Collect from any lessee of property associated with a local economic development project a payment in an amount at least equal to all leasehold excise taxes that would be imposed on and collected with respect to property associated with the completed local economic development project but for the exemption granted by section 13 of this act; (b) pledge the cleanup payments collected to the payment of these bonds; and (c) stop collection of cleanup payments when the bond obligations have been satisfied and notify the lessee of the obligation to pay any leasehold excise taxes which may be due subsequently.
     (2) No local jurisdiction may enter an agreement with the Washington economic development finance authority under this act unless:
     (a) They have delivered a local economic development project plan to the department of community, trade, and economic development that includes a description of the contemplated property and the local economic development project; the estimated cost of the total project, including both public and private components; the estimated period during which the leasehold excise tax exemption in section 13 of this act is to be operative and cleanup payments from lessees are to be devoted to meeting bond obligations; the proposed use of bond funds financing the public portion of the project; and the estimated amounts to be derived from the cleanup payments during the period in which bonds for the project are being paid off;
     (b) The department of community, trade, and economic development has reviewed the plan and determined that the project meets the definition of local economic development project under section 2 of this act.
     (3) Collection of cleanup payments must cease when the payments are no longer necessary or obligated to pay the costs associated with the local economic development project.

NEW SECTION.  Sec. 4   The local economic development project financing account shall be established by the authority. The proceeds of all cleanup payments collected with respect to property associated with a completed local economic development project shall be deposited into the local economic development project financing account. Only the Washington economic development finance authority may authorize expenditures from the account and no appropriation is required for expenditures. The money in the account must be used for the purposes of bond resolution or trust indenture under which the bonds are issued under this chapter and may not be used to replace or supplant existing funding. The deposit of cleanup payments required under this section shall cease when the authority specifies that all monetary obligations associated with bonds issued to pay a local economic development project's costs have been met.

NEW SECTION.  Sec. 5   In connection with any bonds issued by the authority under the terms of this act, the authority shall enter into agreements with participating local jurisdictions which shall provide for the deposit by each local jurisdiction of all cleanup payments collected on property associated with the completed local economic development project. Cleanup payments shall be disbursed bimonthly into the local economic development project account. Cleanup payments collected shall be sufficient, together with other revenues available to the authority, if any, to: (1) Pay the issuance and administrative fees set by the authority; (2) pay the local economic development project costs financed by the authority, to the extent that the payment of the costs has not otherwise been adequately provided for; (3) pay the principal of, premium, if any, and interest on outstanding bonds of the authority issued to finance the local economic development project costs as the same shall become due and payable; and (4) create and maintain reserves required or provided for in any bond resolution or trust indenture authorizing the issuance of such bonds of the authority. The authority's payments shall not be subject to supervision or regulation by any department, committee, board, body, bureau, or agency of the state other than the authority.

NEW SECTION.  Sec. 6   (1) The authority shall provide the assessor and treasurer of the county within which the local economic development project is located and the department of revenue of the parcel number or numbers and street address or addresses, if any, associated with all property that is part of a local economic development project.
     (2) The authority may, from time to time, issue its special obligation bonds in order to carry out the purposes of this chapter and to enable the authority to exercise any of the powers granted to it in this chapter. The bonds may be issued on either a taxable or federally tax-exempt basis. The bonds shall be issued pursuant to a bond resolution or trust indenture and shall be payable solely out of the local economic development project financing account created in section 4 of this act. The local economic development project financing account shall be funded in whole or in part from moneys paid by one or more local jurisdictions for whose benefit such bonds were issued and from any other sources authorized by law, including from the proceeds of bonds issued by the authority for the purpose of refunding any outstanding bonds of the authority.
     (3) The bonds may be secured by:
     (a) A first lien against any unexpended proceeds of the bonds;
     (b) A first lien against moneys in the local economic development project financing account created in section 4 of this act;
     (c) A first or subordinate lien against the cleanup payment receipts of the local jurisdiction or jurisdictions that are collected on property associated with the completed local economic development project or projects;
     (d) A first or subordinate security interest against any real or personal property, tangible or intangible, of the local jurisdiction or jurisdictions that is associated with the local economic development project;
     (e) Any other real or personal property of the local jurisdiction or jurisdictions, tangible or intangible;
     (f) Any combination of (a) through (e) of this subsection; or
     (g) Any other security the authority may deem appropriate or necessary.
     Any security interest created against the unexpended bond proceeds and against the local economic development project financing account shall be immediately valid and binding against the moneys and any securities in which the moneys may be invested without authority or trustee possession, and the security interest shall be prior to any party having any competing claim against the moneys or securities, without filing or recording under Article 9A of the Uniform Commercial Code or Title 62A RCW, and regardless of whether the party has notice of the security interest.
     (4) The bonds may be issued as serial bonds or as term bonds or any such combination. The bonds shall bear such date or dates; mature at such time or times; bear interest at such rate or rates, either fixed or variable; be payable at such time or times; be in such denominations; carry such registration privileges; be made transferable, exchangeable, and interchangeable; be payable in lawful money of the United States of America at such place or places; be subject to such terms of redemption; and be sold at public or private sale, in such manner, at such time, and at such price as the authority shall determine. The bonds shall be executed by the manual or facsimile signatures of the chairperson and the authority's duly elected secretary or its executive director, and by the trustee if the authority determines to use a trustee. At least one signature shall be manually subscribed.
     (5) Any bond resolution, trust indenture, or agreement with a local jurisdiction relating to bonds issued by the authority or the financing or refinancing made available by this act may contain provisions, which may be made a part of the contract with the holders or owners of the bonds to be issued, pertaining to the following, among other matters:
     (a) The security interests granted by the local jurisdiction to secure repayment of any amounts financed and the performance by the local jurisdiction of its other obligations in the financing;
     (b) The security interests granted to the holders or owners of the bonds to secure repayment of the bonds;
     (c) Rentals, fees, and other amounts to be charged, and the sums to be raised in each year through such charges, and the use, investment, and disposition of the sums;
     (d) The segregation of reserves or sinking funds, and the regulation, investment, and disposition thereof;
     (e) Limitations on the purposes to which, or the investments in which, the proceeds of the sale of any issue of bonds may be applied;
     (f) Terms pertaining to the issuance of additional parity bonds;
     (g) Terms pertaining to the incurrence of parity debt;
     (h) The refunding of outstanding bonds;
     (i) Procedures, if any, by which the terms of any contract with bondholders may be amended or abrogated;
     (j) Acts or failures to act that constitute a default by the local jurisdiction or the authority in their respective obligations and the rights and remedies in the event of a default;
     (k) Terms governing performance by the trustee of its obligation; or
     (l) Such other additional covenants, agreements, and provisions as are deemed necessary, useful, or convenient by the authority for the security of the holders of the bonds.
     (6) Bonds may be issued by the authority to refund other outstanding authority bonds, at or before the maturity thereof, and to pay any redemption premium with respect thereto. Bonds issued for such refunding purposes may be combined with bonds issued for the financing or refinancing of new local economic development project costs. Pending the application of the proceeds of the refunding bonds to the redemption of the bonds to be redeemed, the authority may enter into an agreement or agreements with a corporate trustee under section 8 of this act with respect to the interim investment of the proceeds and the application of the proceeds and the earnings on the proceeds to the payment of the principal of and interest on, and the redemption of the bonds to be redeemed.
     (7) All bonds and any interest coupons appertaining to the bonds are negotiable instruments under Title 62A RCW.
     (8) Neither the members of the authority, nor its employees or agents, nor any person executing the bonds is liable personally on the bonds or subject to any personal liability or accountability by reason of the issuance of the bonds.
     (9) The authority may purchase its bonds with any of its funds available for the purchase. The authority may hold, pledge, cancel, or resell the bonds subject to and in accordance with agreements with bondholders.

NEW SECTION.  Sec. 7   Bonds issued under this chapter shall not be deemed to constitute obligations, either general or special, of the state, or a pledge of the faith and credit of the state, or a general obligation of the authority. The bonds shall be special obligations of the authority and shall be payable solely from the local economic development project financing account created in section 4 of this act. Except for any initial appropriations which may be made, the fund or funds shall be funded in whole or in part from moneys paid by one or more local jurisdictions for whose benefit such bonds were issued and from any other sources authorized by law, including from the proceeds of bonds issued by the authority for the purpose of refunding any outstanding bonds of the authority. The issuance of bonds under this chapter shall not obligate, directly, indirectly, or contingently, the state to levy any taxes or appropriate or expend any funds for the payment of the principal or the interest on the bonds.
     Neither the proceeds of bonds issued under this chapter nor any money used or to be used to pay the principal of or interest on the bonds shall constitute public money or property. All of such moneys shall be kept segregated and set apart from funds of the state and any political subdivision of the state and shall not be subject to appropriation or allotment by the state or subject to the provisions of chapter 43.88 RCW.

NEW SECTION.  Sec. 8   All moneys received by or on behalf of the authority under this chapter, whether as proceeds from the sale of bonds or from participants or from other sources, shall be deemed to be trust funds to be held and applied solely as provided in this chapter. The authority, in lieu of receiving and applying the moneys itself, may enter into an agreement or trust indenture with one or more banks or trust companies having the power and authority to conduct trust business in the state to:
     (1) Perform all of any part of the obligations of the authority with respect to: (a) Bonds issued by it; (b) the receipt, investment, and application of the proceeds of the bonds and moneys paid by a local jurisdiction or available from other sources for the payment of the bonds; (c) the enforcement of the obligations of a local jurisdiction in connection with the financing or refinancing of any project; and (d) other matters relating to the exercise of the authority's powers under this chapter;
     (2) Receive, hold, preserve, and enforce any security interest or evidence of security interest granted by a local jurisdiction for purposes of securing the payment of the bonds; and
     (3) Act on behalf of the authority or the holders or owners of bonds of the authority for purposes of assuring or enforcing the payment of the bonds, when due.

NEW SECTION.  Sec. 9   This chapter supplements and neither restricts nor limits any powers that the state or any local jurisdiction might otherwise have under any laws of this state.

NEW SECTION.  Sec. 10   This chapter provides a complete, additional, and alternative method for accomplishing the purposes of this chapter and shall be regarded as supplemental and additional to powers conferred by other laws. The issuance of bonds and refunding bonds under this chapter need not comply with the requirements of any other law applicable to the issuance of bonds.

NEW SECTION.  Sec. 11   This chapter, being necessary for the welfare of the state and its inhabitants, shall be liberally construed to effect its purposes. Insofar as the provisions of this chapter are inconsistent with the provisions of any general or special law, or parts thereof, the provisions of this chapter shall be controlling.

Sec. 12   RCW 43.163.010 and 1999 c 294 s 1 are each amended to read as follows:
     As used in this chapter, the following words and terms have the following meanings, unless the context requires otherwise:
     (1) "Authority" means the Washington economic development finance authority created under RCW 43.163.020 or any board, body, commission, department or officer succeeding to the principal functions of the authority or to whom the powers conferred upon the authority shall be given by law;
     (2) "Bonds" means any bonds, notes, debentures, interim certificates, conditional sales or lease financing agreements, lines of credit, forward purchase agreements, investment agreements, and other banking or financial arrangements, guaranties, or other obligations issued by or entered into by the authority. Such bonds may be issued on either a tax-exempt or taxable basis;
     (3) "Borrower" means one or more public or private persons or entities acting as lessee, purchaser, mortgagor, or borrower who has obtained or is seeking to obtain financing either from the authority or from an eligible banking organization that has obtained or is seeking to obtain funds from the authority to finance a project. A borrower may include a party who transfers the right of use and occupancy to another party by lease, sublease or otherwise, or a party who is seeking or has obtained a financial guaranty from the authority;
     (4) "Eligible banking organization" means any organization subject to regulation by the director of the department of financial institutions, any national bank, federal savings and loan association, and federal credit union located within this state;
     (5) "Eligible export transaction" means any preexport or export activity by a person or entity located in the state of Washington involving a sale for export and product sale which, in the judgment of the authority: (a) Will create or maintain employment in the state of Washington, (b) will obtain a material percent of its value from manufactured goods or services made, processed or occurring in Washington, and (c) could not otherwise obtain financing on reasonable terms from an eligible banking organization;
     (6) "Eligible farmer" means any person who is a resident of the state of Washington and whose specific acreage qualifying for receipts from the federal department of agriculture under its conservation reserve program is within the state of Washington;
     (7) "Eligible person" means an individual, partnership, corporation, or joint venture carrying on business, or proposing to carry on business within the state and is seeking financial assistance under RCW 43.163.210;
     (8) "Financial assistance" means the infusion of capital to persons for use in the development and exploitation of specific inventions and products;
     (9) "Financing document" means an instrument executed by the authority and one or more persons or entities pertaining to the issuance of or security for bonds, or the application of the proceeds of bonds or other funds of, or payable to, the authority. A financing document may include, but need not be limited to, a lease, installment sale agreement, conditional sale agreement, mortgage, loan agreement, trust agreement or indenture, security agreement, letter or line of credit, reimbursement agreement, insurance policy, guaranty agreement, or currency or interest rate swap agreement. A financing document also may be an agreement between the authority and an eligible banking organization which has agreed to make a loan to a borrower;
     (10) "Plan" means the general plan of economic development finance objectives developed and adopted by the authority, and updated from time to time, as required under RCW 43.163.090;
     (11) "Economic development activities" means activities related to: Manufacturing, processing, research, production, assembly, tooling, warehousing, airports, docks and wharves, mass commuting facilities, high-speed intercity rail facilities, public broadcasting, pollution control, brownfield cleanup and development, solid waste disposal, federally qualified hazardous waste facilities, energy generating, conservation, or transmission facilities, and sports facilities and industrial parks and activities conducted within a federally designated enterprise or empowerment zone or geographic area of similar nature;
     (12) "Project costs" means costs of:
     (a) Acquisition, lease, construction, reconstruction, remodeling, refurbishing, rehabilitation, extension, and enlargement of land, rights to land, buildings, structures, docks, wharves, fixtures, machinery, equipment, excavations, paving, landscaping, utilities, approaches, roadways and parking, handling and storage areas, and similar ancillary facilities, and any other real or personal property included in an economic development activity;
     (b) Architectural, engineering, consulting, accounting, and legal costs related directly to the development, financing, acquisition, lease, construction, reconstruction, remodeling, refurbishing, rehabilitation, extension, and enlargement of an activity included under subsection (11) of this section, including costs of studies assessing the feasibility of an economic development activity;
     (c) Finance costs, including the costs of credit enhancement and discounts, if any, the costs of issuing revenue bonds, and costs incurred in carrying out any financing document;
     (d) Start-up costs, working capital, capitalized research and development costs, capitalized interest during construction and during the eighteen months after estimated completion of construction, and capitalized debt service or repair and replacement or other appropriate reserves;
     (e) The refunding of any outstanding obligations incurred for any of the costs outlined in this subsection; and
     (f) Other costs incidental to any of the costs listed in this section;
     (13) "Product" means a product, device, technique, or process that is or may be exploitable commercially. "Product" does not refer to pure research, but shall be construed to apply to products, devices, techniques, or processes that have advanced beyond the theoretic stage and are readily capable of being, or have been, reduced to practice;
     (14) "Financing agreements" means, and includes without limitation, a contractual arrangement with an eligible person whereby the authority obtains rights from or in an invention or product or proceeds from an invention or product in exchange for the granting of financial and other assistance to the person.

NEW SECTION.  Sec. 13   A new section is added to chapter 82.29A RCW to read as follows:
     All leasehold interests in completed local economic development projects financed under this act are exempt from tax under this chapter for the period of time lessees are making cleanup payments as required by this act.

NEW SECTION.  Sec. 14   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. 15   Sections 1 through 11 of this act constitute a new chapter in Title 43 RCW.