BILL REQ. #:  H-4256.1 

Read first time 01/16/08.   Referred to Committee on Housing.

     AN ACT Relating to affordable housing financing; adding a new section to chapter 82.14 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   The legislature recognizes that household incomes have not kept pace with rising housing costs in many areas of the state. The legislature further recognizes that there are many factors contributing to the escalation in housing costs that include either rapid development or redevelopment, or both, within specific geographic areas. The legislature further recognizes that the escalation in housing costs, particularly in high-cost areas, has forced many low-income and moderate-income households to pay excessive amounts of their income for housing or delayed their opportunity for homeownership. The legislature further recognizes that what is needed is a financing program to help mitigate the impacts of escalating housing costs on low and moderate-income households by capturing a portion of the state tax revenue associated with either development or redevelopment activities, or both, within a specified geographic area of a local government.
     (2) The legislature finds that it is in the public interest to create an affordable housing financing program that invests a portion of the revenues generated from either development or redevelopment activity, or both, within a local government's designated area to fund affordable housing projects through a credit against the state sales and use taxes.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Affordable housing" means residential housing that is rented by a household that is within the means of low-income households for a period of not less than fifty years. For the purposes of housing intended for owner occupancy, "affordable housing" means residential housing that is within the means of low or moderate-income households for a period of not less than fifty years.
     (2) "Annual state contribution limit" means fifteen million dollars statewide per fiscal year.
     (3) "Base year" means the calendar year prior to when a local government receives approval by the department for a project award under this chapter.
     (4) "Department" means the department of community, trade, and economic development.
     (5) "Designated area" means a compact identifiable geographic subarea that is located within the boundaries of a local government's urban growth area and where residents may obtain a variety of products and services. A designated area must contain:
     (a) Several existing or previous, or both, business establishments that may include but are not limited to shops, offices, banks, restaurants, or governmental agencies;
     (b) Public facilities that include, but are not limited to streets, lighting, transit, domestic water, and sanitary sewer systems;
     (c) A mixture of uses and activities that may include housing, recreation, and cultural activities in association with uses identified in (a) of this subsection.
     (6) "High-cost area" means a county where the third quarter median house price for the previous year as reported by the Washington center for real estate research at Washington State University is equal to or greater than one hundred thirty percent of the statewide median house price published during the same time period.
     (7) "Household" means a single person, family, or unrelated persons living together.
     (8) "Local government" means a city, town, or county.
     (9) "Low-income household" means a single person, family, or unrelated persons living together whose adjusted income is at or below eighty percent of the median family income adjusted for family size, for the county where the project is located. For cities located in high-cost areas, "low-income household" means a household that has an income at or below one hundred percent of the median family income adjusted for family size, for the county where the project is located.
     (10) "Moderate-income household" means a single person, family, or unrelated persons living together whose adjusted income is more than eighty percent but is at or below one hundred fifteen percent of the median family income adjusted for family size, for the county where the project is located. For cities located in high-cost areas, "moderate-income household" means a household that has an income that is more than one hundred percent, but at or below one hundred fifty percent, of the median family income adjusted for family size, for the county where the project is located.
     (11) "Project award" means that amount of state contribution awarded to a local government for affordable housing activities eligible under section 4 of this act.
     (12) "Revenue from local public sources" means the local government's portion of property taxes and local sales and use taxes dedicated to the financing of affordable housing under this chapter. "Revenue from local public sources" also includes bonds issued by the local government that are used to finance affordable housing under this chapter or amounts from a property tax levy imposed by the local government that is dedicated to financing affordable housing under this chapter. Expenditures by the local government associated with the administration of affordable housing programs financed under this chapter shall be considered "revenue from local public sources."
     (13) "State contribution" means the lesser of:
     (a) Five million dollars per fiscal year, for a period not to exceed twenty-five years;
     (b) The estimated total increase of state property taxes and state sales and use taxes, above the base year, within the designated area for a period not to exceed twenty-five years; or
     (c) An amount equal to the revenue from local public sources that is dedicated by the local government for the financing of affordable housing developments within the designated area for a period not to exceed twenty-five years.

NEW SECTION.  Sec. 3   The housing everyone financing tool program is created in the department for the purpose of providing direct grants to local governments that are used for financing affordable housing by capturing a portion of the anticipated growth in state revenues, within a designated area of a local government, that are the direct result of development or redevelopment. The program shall be developed and administered by the department with advice and input from the department of revenue and the affordable housing advisory board established in RCW 43.185B.020.

NEW SECTION.  Sec. 4   (1) The department shall make project awards to local governments to assist in the financing of affordable housing within designated areas.
     (2) Activities eligible for assistance under this chapter include, but are not limited to:
     (a) New construction, rehabilitation, or acquisition of affordable housing, including but not limited to public improvements directly related to the affordable housing financed under this chapter and planning, engineering, architectural, and financial services associated with affordable housing financed under this chapter;
     (b) Acquisition of existing housing units for resale or rent as affordable housing; and
     (c) Acquisition of land that will be used for affordable housing.

NEW SECTION.  Sec. 5   (1) Prior to applying to the department to use housing everyone financing tool financing, a local government shall:
     (a) Designate a designated area as defined in section 2(5) of this act;
     (b) Provide public notice as required in section 6(2) of this act; and
     (c) Pass an ordinance adopting the designated area as required in section 6(1) of this act.
     (2)(a) As a condition to imposing a sales and use tax under section 7 of this act, a local government must apply to the department and be approved for a project award amount. The application shall be in a form and manner prescribed by the department and include but not be limited to:
     (i) Information on the type and number of affordable housing units to be financed within the designated area;
     (ii) Information establishing that the applicant is an eligible candidate to impose the local sales and use tax under section 7 of this act;
     (iii) The anticipated effective date for imposing the tax, taking into consideration the requirements of RCW 82.14.055(2);
     (iv) The estimated number of years that the tax, under section 7 of this act, will need to be imposed;
     (v) The amount of revenue from local public sources that will be dedicated to affordable housing in the designated area;
     (vi) An estimate of the amount of tax revenue to be received in each fiscal year that the tax will be imposed; and
     (vii) Other information the department and the department of revenue deems necessary.
     (b) The department shall make available forms to be used for this purpose.
     (3) In evaluating applications for project awards, the department shall give priority consideration to:
     (a) Applications from local governments that plan or elect to plan under the state's growth management act, chapter 36.70A RCW; and
     (b) Applications from local governments that provide financing for affordable housing that supports transit-oriented development.
     (4)(a) Once the department has approved the local government to use housing everyone financing tool financing, notification of a project award must be sent by the department to the local government authorizing the local government to impose the local sales and use tax authorized under section 7 of this act, subject to the conditions in section 7 of this act.
     (b) A notice of approval to use housing everyone financing tool financing shall contain a project award that represents the maximum amount of state contribution that the local government can earn each year that housing everyone financing tool financing is used. The total of all project awards may not exceed the annual state contribution limit. The determination of a project award shall be made based on information contained in the application and the remaining amount of annual state contribution limit to be awarded. Determination of a project award by the department is final.
     (5) Money collected from the taxes imposed under section 7 of this act may be used only for the purpose of paying all or a portion of the debt service on bonds issued by the local government to finance affordable housing within the designated area or to pay for affordable housing within the designated area on a pay-as-you-go basis, or both.

NEW SECTION.  Sec. 6   (1) To designate an area as a designated area, a local government must adopt an ordinance establishing the designated area that:
     (a) Describes the boundaries of the designated area;
     (b) Certifies that the designated area meets the requirements of section 2(5) of this act;
     (c) Estimates the type, number, and cost of affordable housing units that will receive financial assistance under this chapter; and
     (d) Estimates the time period of the local government's commitment to provide revenue from local public sources to finance affordable housing within the designated area.
     (2) The local government must hold a public hearing on the proposed financing of affordable housing under this chapter before passage of the ordinance establishing the designated area. The public hearing shall be held by the legislative authority of the local government. The public hearing is subject to the notice requirements of applicable state and local laws.

NEW SECTION.  Sec. 7   A new section is added to chapter 82.14 RCW to read as follows:
     (1) A local government that has been approved by the department of community, trade, and economic development to use affordable housing financing under chapter 43.--- RCW (sections 1 through 6, 8 through 10, and 12 of this act) may impose sales and use taxes 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 sponsoring local government or cosponsoring local government. The rate of tax may not exceed the rate provided in RCW 82.08.020(1), less the aggregate rates of any other local sales and use taxes imposed on the same taxable events that are credited against the state sales and use taxes imposed under chapters 82.08 and 82.12 RCW. The rate of tax may be changed only on the first day of a fiscal year as needed. Notice of rate changes must be provided to the department on the first day of March to be effective on July 1st of the next fiscal year.
     (2) The tax authorized under subsection (1) of this section shall be credited against the state taxes imposed under chapter 82.08 or 82.12 RCW. The department shall perform the collection of such taxes on behalf of the local government at no cost to the local government and shall remit the taxes as provided in RCW 82.14.060.
     (3)(a) No tax may be imposed under the authority of this section:
     (i) Before July 1, 2009;
     (ii) Before approval by the department of community, trade, and economic development of the local government's application for affordable housing financing under chapter 43.--- RCW (sections 1 through 6, 8 through 10, and 12 of this act); and
(iii) Before the local government has certified to the department of community, trade, and economic development that the revenue from local public sources, as defined in section 2(12) of this act, is available to finance its portion of affordable housing.
     (b) The tax imposed under this section shall expire when either (i) the local government's bonds issued to finance affordable housing under chapter 43.--- RCW (sections 1 through 6, 8 through 10, and 12 of this act) are retired, but not more than twenty-five years after the tax is first imposed or (ii) the local government has received the amount of the project award, as determined by the department of community, trade, and economic development.
     (4) An ordinance adopted by the legislative authority of a local government 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 cumulative 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 distributed for the remainder of any fiscal year in which either:
     (i) The amount of tax received by the local government equals the amount of the state contribution; or
     (ii) The amount of tax received by the local government equals the amount of project award granted in the approval notice described in section 5 of this act;
     (d) The tax shall be distributed again, should it cease to be distributed 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) The department shall determine the amount of tax receipts distributed to each local government imposing sales and use tax under this section and shall advise a local government when tax distributions for the fiscal year equal the amount of state contribution for that fiscal year as provided in subsection (6) of this section. Determinations by the department of the amount of tax distributions attributable to each local government are final and may 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 money in the general fund.
     (6) Each year, the amount of taxes approved by the department for distribution to a local government in the next fiscal year shall be equal to the state contribution and shall be no more than the total revenue from local public sources as described in section 2(12) of this act. A local government may not receive, in any fiscal year, more revenues from taxes imposed under the authority of this section than the amount approved annually by the department. The department shall not approve the receipt of more distributions of sales and use tax under this section to a local government than is authorized under subsection (4) of this section.
     (7) The amount of tax distributions received from taxes imposed under the authority of this section by all local governments is limited annually to not more than fifteen million dollars.
     (8) Subject to chapter 43.--- RCW (sections 1 through 6, 8 through 10, and 12 of this act), the tax imposed under the authority of this section may be applied either to provide for the payment of debt service on bonds issued by the local government to finance affordable housing under chapter 43.--- RCW (sections 1 through 6, 8 through 10, and 12 of this act) by the local government or to pay affordable housing costs on a pay-as-you-go basis, or both.
     (9) The definitions in section 2 of this act apply to this section unless the context clearly requires otherwise.

NEW SECTION.  Sec. 8   The department and the department of revenue shall periodically report on the implementation of the housing everyone financing tool program to the governor and the legislature as the department and the department of revenue deems appropriate and recommend such amendments, changes in, and modifications of this act as seem proper.

NEW SECTION.  Sec. 9   The department and the department of revenue may adopt rules under chapter 34.05 RCW they consider necessary for the administration of this chapter.

NEW SECTION.  Sec. 10   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. 11   Sections 1 through 6, 8 through 10, and 12 of this act are each added to Title 43 RCW and codified with the chapter heading "housing everyone financing tool program."

NEW SECTION.  Sec. 12   This chapter may be known and cited as the "housing everyone financing tool act."