ESHB 1469

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Passed House:

March 4, 2011

Title: An act relating to landscape conservation and local infrastructure.

Brief Description: Concerning landscape conservation and local infrastructure.

Sponsors: House Committee on Local Government (originally sponsored by Representatives Springer, Rodne, Tharinger, Carlyle, Eddy, Dammeier, Liias, Fitzgibbon, Goodman, Zeiger, Upthegrove, Sullivan, Reykdal and Smith).

Brief History:

Committee Activity:

Local Government: 2/2/11, 2/16/11 [DPS];

Ways & Means: 2/22/11, 2/24/11 [DPS(LG)].

Floor Activity:

Passed House: 3/4/11, 69-28.

Brief Summary of Engrossed Substitute Bill

  • Authorizes qualifying cities to create Local Infrastructure Project Areas (LIPAs) within their boundaries and to finance public improvements in LIPAs through property taxes imposed by the city and the county within which the LIPA is located.

  • Specifies that a qualifying city must reside within a county that borders Puget Sound, has 600,000 or more residents, and that has an established transfer of development rights program.

  • Establishes numerous administrative, procedural, and reporting requirements related to LIPA creation and financing.


Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 6 members: Representatives Takko, Chair; Tharinger, Vice Chair; Asay, Assistant Ranking Minority Member; Fitzgibbon, Springer and Upthegrove.

Minority Report: Do not pass. Signed by 3 members: Representatives Angel, Ranking Minority Member; Rodne and Smith.

Staff: Ethan Moreno (786-7386).


Majority Report: The substitute bill by Committee on Local Government be substituted therefor and the substitute bill do pass. Signed by 18 members: Representatives Hunter, Chair; Darneille, Vice Chair; Hasegawa, Vice Chair; Dammeier, Assistant Ranking Minority Member; Carlyle, Cody, Dickerson, Haigh, Hudgins, Hunt, Kagi, Kenney, Ormsby, Pettigrew, Seaquist, Springer, Sullivan and Wilcox.

Minority Report: Do not pass. Signed by 9 members: Representatives Alexander, Ranking Minority Member; Bailey, Assistant Ranking Minority Member; Orcutt, Assistant Ranking Minority Member; Chandler, Haler, Hinkle, Parker, Ross and Schmick.

Staff: Jeffrey Mitchell (786-7139).


Tax Increment Financing.

Traditional tax increment financing is a method of allocating a portion of property taxes to finance economic development in urban areas. Local governments that utilize tax increment financing typically issue bonds to finance public improvements. To repay its bondholders, the local government is permitted to draw upon regular property tax revenue collected from property owners inside a special district surrounding the site of the public improvements. Construction of public improvements tends to increase the market values of nearby properties. Increases in value can result in increased property taxes for each taxing district that includes property near the public improvement. Under tax increment financing, the local government making the improvement receives all of the resulting tax revenue increase. For example, if a city makes an improvement that raises nearby property values, the city receives all of the resulting increase in property taxes, rather than sharing that increase with state, county, and other local districts as would occur under normal property tax allocation practices.

2009 Local Revitalization Financing.

Legislation adopted in 2009 (i.e., Second Substitute Senate Bill 5045 (2SSB 5045), enacted as Chapter 270, Laws of 2009) authorized participating local governments to create revitalization areas. These same local governments are permitted to use certain tax revenues that increase within the area to finance local public improvements. Under the 2009 legislation, the following sources of revenue were authorized to pay for bonds that may be issued to finance improvements:

Funds from local public sources may pay for public improvement costs on a pay-as-you-go basis.

Public improvements or projects that may be financed through the tax increment program established in 2SSB 5045 include:

The following are also authorized public improvement expenditures:

Certain environmental analyses, maintenance, and security actions may also be financed through the tax increment program established in the 2009 legislation.

Transfer of Development Rights and Recent Legislative Activity.

A transfer of development rights (TDR) occurs when a qualifying land owner, through a permanent deed restriction, severs potential development rights from a property and transfers them to a recipient for use on a different property. In TDR transactions, transferred rights are generally shifted from sending areas with lower population densities to receiving areas with higher population densities. The monetary values associated with transferred rights constitute compensation to a land owner for development that may have otherwise occurred on the transferring property.

Programs for transferring development rights may be used to preserve natural and historic spaces, encourage infill, and for other purposes.

Legislation establishing TDR provisions has been adopted in recent sessions. In 2007 the Legislature directed the Department of Community, Trade and Economic Development (now the Department of Commerce or COM) to fund a process to develop a regional TDR program that comports with the Growth Management Act (GMA). The legislation specified that the TDR program must encourage King, Kitsap, Pierce, and Snohomish Counties, and the cities within, to participate in the development and implementation of regional frameworks and mechanisms for TDR programs. Building upon the 2007 legislation, in 2009 the Legislature directed the COM, subject to funding limitations, to establish a regional TDR program in central Puget Sound counties and cities. The regional program is intended to foster voluntary local government participation that will result in the transfer of development rights between jurisdictions.

Puget Sound Regional Council.

The Puget Sound Regional Council (PSRC) is an association of cities, towns, counties, ports, and state agencies that serves as a forum for developing policies and making decisions about regional growth and transportation issues in the four-county central Puget Sound region. Membership of the PSRC includes King, Kitsap, Pierce, and Snohomish Counties, 72 cities and towns, four port districts, and transit agencies and tribes within the region. Two state agencies, the Washington State Department of Transportation and the Washington State Transportation Commission, are also members of the PSRC.

Growth Management Act.

The GMA is the comprehensive land use planning framework for county and city governments in Washington. Enacted in 1990 and 1991, the GMA establishes numerous requirements for local governments obligated by mandate or choice to fully plan under the GMA (planning jurisdictions) and a reduced number of directives for all other counties and cities. The COM provides technical and financial assistance to jurisdictions that must satisfy obligations of the GMA.

The GMA directs planning jurisdictions to adopt internally consistent comprehensive land use plans that are generalized, coordinated land use policy statements of the governing body. Comprehensive plans must address specified planning elements, each of which is a subset of a comprehensive plan. Comprehensive plans may also include optional elements, items, or studies, pertaining to conservation, solar energy, recreation, or other topics selected by the jurisdiction. The implementation of comprehensive plans occurs through locally adopted development regulations.

The GMA requires all counties and cities to designate, where appropriate, agricultural and forest lands of long-term commercial significance. Planning jurisdictions must also adopt regulations to conserve these lands.

Summary of Engrossed Substitute Bill:

A process for establishing Local Infrastructure Project Areas (LIPAs) within qualifying cities and funding public improvements within these areas is established.

Preliminary Actions by Eligible Counties – Designation, Calculation, and Reporting of Development Rights.

Prior to the establishment of a LIPA, an eligible county, a term defined to mean any county that borders Puget Sound, has 600,000 or more residents, and that has an established transfer of development rights (TDR) program, must designate all agricultural and forest land of long-term commercial significance within its jurisdiction as sending areas for conservation under its TDR program. An eligible county may also designate a portion of its rural zoned lands as sending areas for conservation under its TDR program if at least 50 percent of the total acreage of land classified as agricultural and forest land of long-term commercial significance within the county has been protected from development through permanent conservation easements or other conservation provisions. An eligible county must also, subject to specified requirements, calculate the number of development rights from these lands of long-term commercial significance that are eligible for transfer to receiving areas.

On or before September 1, 2011, each eligible county must report to the Puget Sound Regional Council (PSRC) the total number of transferrable development rights from agricultural and forest land of long-term commercial significance and designated rural lands that may be available for allocation to receiving cities. For purposes of LIPA provisions, a "receiving city" is a city within an eligible county that has a population plus employment of 22,500 or more.

Preliminary Actions by the Puget Sound Regional Council.

Following the receipt of development rights information from eligible counties, the PSRC must allocate these development rights among receiving cities. This process of distributing allocated shares of transferred rights must be determined in consultation with eligible counties and receiving cities, must be based on growth targets, and must comply with other requirements.

A city that accepts all or a portion of its allocated share of rights is eligible to become a "sponsoring city." A "sponsoring city" is a city that meets specified allocation requirements, adopts a plan for the development of infrastructure within one or more LIPA, and creates one or more LIPA.

Preliminary Actions by a Sponsoring City.

The creation of a LIPA must be accomplished through an ordinance or resolution of the sponsoring city that describes the area boundaries and the proposed public improvements to be financed in the LIPA, specifies the date when LIPA-related property tax distributions will begin, and delineates participating taxing districts. "Public improvements" are defined to include specified infrastructure improvements, expenditures for facilities and improvements that support affordable housing, expenditures for maintenance and security for common areas, and expenditures on historic preservation activities. "Taxing district" is defined as a city or county that levies, or has levied on its behalf, regular property taxes upon real property located within a LIPA.

Before adopting an ordinance or resolution creating a LIPA, a sponsoring city must comply with numerous provisions, including adopting a plan for the development of public infrastructure within one or more LIPA that meets enumerated requirements and is developed in consultation with the Department of Transportation and the county where the LIPA to be created is located. The sponsoring city also must:

Adopted TDR policies or implemented development regulations must meet specified requirements, including:

A sponsoring city must designate all agricultural and forest land of long-term commercial significance and qualifying rural zoned lands within the eligible counties as available sending areas.

Financing LIPAs.

Provisions for the financing of LIPAs through property taxes are established.

Beginning in the second calendar year following the creation of a LIPA, the county treasurer must distribute receipts from regular taxes imposed on real property within the LIPA to the sponsoring city and participating taxing districts. Under the distribution provisions, each participating taxing district and the sponsoring city must receive a portion of their regular property taxes for the LIPA as determined by specified requirements, while the sponsoring city must receive an additional portion of the regular property taxes levied by it and by participating taxing districts upon property within the LIPA. The sponsoring city may agree to receive less than the full amount of the additional portion if certain conditions are met.

The distributions of property tax receipts under LIPA provisions must cease on the earlier of:

A distribution of property tax receipts under LIPA provisions may not exceed a term of 25 years. Any excess LIPA-related receipts and associated earnings remaining at the time the distribution of funds for a LIPA terminates must be returned to the county treasurer and distributed to the appropriate taxing districts.

Limitations on LIPAs.

Geographic and other limitations for LIPAs are specified. For example, the territory within a LIPA must be contiguous tracts, lots, pieces, or parcels, and the LIPAs, at their time of creation, may not comprise an area containing more than 25 percent of the total assessed value of taxable property within the sponsoring city. Additionally, public improvements to be financed with LIPA financing must be located in the LIPA.

Transferred Rights – Eligibility Provisions.

Only development rights from agricultural and forest land of long-term commercial significance within the eligible counties, and qualifying rural-zoned lands within the eligible counties, may be transferred to a city for use in a LIPA.

Reports and Rule-Making – PSRC, Participating Jurisdictions, and the Department of Commerce.

Eligible counties, in collaboration with sponsoring cities, must provide a report to the Department of Commerce (COM) by March 1 of every other year. The report must satisfy numerous and specific content requirements, examples of which are listed below.

The COM is authorized to adopt any rules it considers necessary for the administration of the LIPA provisions.

Growth Management Act.

The list of optional comprehensive plan elements that may be adopted under the GMA is expanded to expressly authorize a receiving city (a city within an eligible county that has a population plus employment of 22,500 or more) to adopt a comprehensive plan element and associated development regulations that apply within a LIPA in which transferable development rights from a sending area may be used.

Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony (Local Government):

(In support) A couple of issues related to this bill have arisen: its provisions that allow the 1 percent annual property tax revenue limitation to be exceeded; and its provisions related to port district revenues. An amendment is being developed to address these issues. Farmers have expressed consistent concerns about the pressures they are under to develop. They wish to keep farming, but the economic pressures are tremendous. This bill and its transfer of development rights mechanism is an attempt to help farmers continue farming. The pressures for development will increase as 1.5 million people are expected to move into the Puget Sound area. Cities, however, are struggling to pay for needed infrastructure in these growth areas. The Cascade Land Conservancy has developed a way to marry farmers' needs to continue farming and cities' needs to construct infrastructure. This bill is an opportunity to promote a concept in three counties.

Numerous environmental organizations support this bill. This bill represents a good concept, has several benefits, and accommodates growth while preserving non-urbanized areas. Cities cannot reach their Growth Management Act-mandated densities because of infrastructure costs. This bill is good for builders and developers. The Department of Transportation supports the concept of transferring development rights and would like an amendment that requires consultation with the agency and allows them to be part of the solution.

Mixed income neighborhoods that have been created by the Seattle Housing Authority in the past 10-15 years have added significant value to the tax rolls, but desired housing densities have not yet been met. The link between conservation and city density is important, as is the flexibility for cities that is provided in the bill. Tax increment financing should continue to be explored. King County has used transfer of development rights programs to transfer 2,200 dwelling units out of the rural landscape and into urban areas. This has saved the county a significant amount, as providing services to rural dwelling units is considerably more expensive to local governments than serving urban areas. This bill will help with affordable housing and will help cities to accept density within their jurisdiction.

This is ground-breaking legislation and the proponents intend to live within the 1 percent property tax revenue cap. This bill will help preserve the environment and make cities great places to live in. This bill will also help create economically competitive cities and will help prevent sprawl.

(Opposed) The bill authorizes tax increment financing through a complex transfer of development rights mechanisms. The bill proposes to capture increased revenues from cities, counties, and port districts. Ports support tax increment financing and are interested in transfer of development rights programs. Ports align property tax powers with economic development and transportation priorities. Ports have existing authority to blend their resources and have strong reservations about provisions in the bill that would compel ports to raise taxes and share those proceeds with cities.

Staff Summary of Public Testimony (Ways & Means):

(In support) We are trying to come up with creative ways to preserve land of significance such as agricultural lands and natural forest lands. This bill combines a traditional transfer of development rights program with a financing mechanism to provide revenues to fund the infrastructure necessary to serve additional density within urban areas. The substitute bill does not allow for an increase above the 1 percent property tax revenue limit. Over 45 other states use some form of tax increment financing. The citizens are best served when we work together as a region. This bill serves farmers and foresters because they are directly compensated for the development rights that they trade to urban areas. The bill also allows urban developers to profit by the extra density they acquire as a result of this program. Urban residents are able to maintain natural resource lands in close proximity for their use and enjoyment. The bill has no fiscal impact. It satisfies the goals of the Growth Management Act in a way that everyone can support. It improves the economic prospects for our forests, farmlands, cities, and industrial areas. It is a new form of regionalism where the whole is greater than the sum of the parts. This is a creative way to maintain working lands within the three county area. It is a great idea for partnerships and it is voluntary. The City of Puyallup has a rich agricultural history and is working to develop a transfer of development rights program.

(Opposed) None.

Persons Testifying (Local Government): (In support) Representative Springer, prime sponsor; April Putney, Futurewise and Association of Washington Cities; Scott Hildebrand, Master Builders Association of King and Snohomish Counties; Elizabeth Robbins, Washington State Department of Transportation; Mark Doumit, Washington Forest Protection Association; Jeanette McKague, Washington Realtors; Darren Greve, King County; Thomas Tierney, Seattle Housing Authority; and Gene Duvernoy, Cascade Land Conservancy.

(Opposed) Eric Johnson, Washington Public Ports Association.

Persons Testifying (Ways & Means): Representative Springer, prime sponsor; Gene Duvernoy, Cascade Land Conservancy; Mark Doumit, Washington Forest Protection Agency; Dave Williams, Association of Washington Cities; and Tim Parham, City of Puyallup.

Persons Signed In To Testify But Not Testifying (Local Government): None.

Persons Signed In To Testify But Not Testifying (Ways & Means): None.