BILL REQ. #:  Z-0805.3 

Read first time 12/05/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to reducing certain local sales and use tax provisions; amending RCW 82.14.415 and 82.14.500; and declaring an emergency.

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

Sec. 1   RCW 82.14.415 and 2011 c 353 s 10 are each amended to read as follows:
     (1) The legislative authority of any city that is located in a county with a population greater than six hundred thousand that annexes an area consistent with its comprehensive plan required by chapter 36.70A RCW may impose a sales and use tax in accordance with the terms of this chapter. The tax is in addition to other taxes authorized by law and is 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 city. The tax may only be imposed by a city if:
     (a) The city has commenced annexation of an area having a population of at least ten thousand people, or four thousand in the case of a city described under subsection (3)(a)(i) of this section, prior to January 1, 2015; and
     (b) The city legislative authority determines by resolution or ordinance that the projected cost to provide municipal services to the annexation area exceeds the projected general revenue that the city would otherwise receive from the annexation area on an annual basis.
     (2) The tax authorized under this section is a credit against the state tax under chapter 82.08 or 82.12 RCW. The department of revenue must perform the collection of such taxes on behalf of the city at no cost to the city and must remit the tax to the city as provided in RCW 82.14.060.
     (3)(a) Except as provided in (b) of this subsection, the maximum rate of tax any city may impose under this section is:
     (i) 0.1 percent for each annexed area in which the population is greater than ten thousand and less than twenty thousand. The ten thousand population threshold in this subsection (3)(a)(i) is four thousand for a city with a population between one hundred fifteen thousand and one hundred forty thousand and located within a county with a population over one million five hundred thousand; and
     (ii) 0.2 percent for an annexed area in which the population is greater than twenty thousand.
     (b) Beginning July 1, 2011, the maximum rate of tax imposed under this section is 0.85 percent for an annexed area in which the population is greater than sixteen thousand if the annexed area was, prior to November 1, 2008, officially designated as a potential annexation area by more than one city, one of which has a population greater than four hundred thousand.
     (4)(a) Except as provided in (b) of this subsection, the maximum cumulative rate of tax a city may impose under subsection (3)(a) of this section is 0.2 percent for the total number of annexed areas the city may annex.
     (b) The maximum cumulative rate of tax a city may impose under subsection (3)(a) of this section is 0.3 percent, beginning July 1, 2011, if the city commenced annexation of an area, prior to January 1, 2010, that would have otherwise allowed the city to increase the rate of tax imposed under this section absent the rate limit imposed in (a) of this subsection.
     (c) The maximum cumulative rate of tax a city may impose under subsection (3)(b) of this section is 0.85 percent for the single annexed area the city may annex and the amount of tax distributed to a city under subsection (3)(b) of this section may not exceed five million dollars per fiscal year.
     (5) The tax imposed by this section may only be imposed at the beginning of a fiscal year and may continue for no more than ten years from the date that each increment of the tax is first imposed. Tax rate increases due to additional annexed areas are effective on July 1st of the fiscal year following the fiscal year in which the annexation occurred, provided that notice is given to the department as set forth in subsection (9) of this section.
     (6) All revenue collected under this section may be used solely to provide, maintain, and operate municipal services for the annexation area.
     (7) The revenues from the tax authorized in this section may not exceed that which the city deems necessary to generate revenue equal to the difference between the city's cost to provide, maintain, and operate municipal services for the annexation area and the general revenues that the cities would otherwise expect to receive from the annexation during a year. If the revenues from the tax authorized in this section and the revenues from the annexation area exceed the costs to the city to provide, maintain, and operate municipal services for the annexation area during a given year, the city must notify the department and the tax distributions authorized in this section must be suspended for the remainder of the year.
     (8) No tax may be imposed under this section before July 1, 2007. No tax may be first imposed under this section after the effective date of this section. Before imposing a tax under this section, the legislative authority of a city must adopt an ordinance that includes the following:
     (a) A certification that the amount needed to provide municipal services to the annexed area reflects the city's true and actual costs;
     (b) The rate of tax under this section that is imposed within the city; and
     (c) The threshold amount for the first fiscal year following the annexation and passage of the ordinance.
     (9) The tax must cease to be distributed to the city for the remainder of the fiscal year once the threshold amount has been reached. No later than March 1st of each year, the city must provide the department with a certification of the city's true and actual costs to provide municipal services to the annexed area, a new threshold amount for the next fiscal year, and notice of any applicable tax rate changes. Distributions of tax under this section must begin again on July 1st of the next fiscal year and continue until the new threshold amount has been reached or June 30th, whichever is sooner. Any revenue generated by the tax in excess of the threshold amount belongs to the state of Washington. Any amount resulting from the threshold amount less the total fiscal year distributions, as of June 30th, may not be carried forward to the next fiscal year.
     (10)(a) The tax must cease to be distributed to a city imposing the tax under subsection (3)(b) of this section for the remainder of the fiscal year, if the total distributions to the city imposing the tax exceed five million dollars for the fiscal year.
     (b) Beginning with fiscal year 2013, the tax must cease to be distributed to a city imposing the tax under subsection (3) of this section for the remainder of the fiscal year, if the total distributions to the city imposing the tax exceed ninety percent of the cumulative amount of tax authorized by this section and distributed to the city for the fiscal year ending June 30, 2012.
     (11) The resident population of the annexation area must be determined in accordance with chapter 35.13 or 35A.14 RCW.
     (12) The following definitions apply throughout this section unless the context clearly requires otherwise:
     (a) "Annexation area" means an area that has been annexed to a city under chapter 35.13 or 35A.14 RCW. "Annexation area" includes all territory described in the city resolution.
     (b) "Commenced annexation" means the initiation of annexation proceedings has taken place under the direct petition method or the election method under chapter 35.13 or 35A.14 RCW.
     (c) "Department" means the department of revenue.
     (d) "Municipal services" means those services customarily provided to the public by city government.
     (e) "Fiscal year" means the year beginning July 1st and ending the following June 30th.
     (f) "Potential annexation area" means one or more geographic areas that a city has officially designated for potential future annexation, as part of its comprehensive plan adoption process under the state growth management act, chapter 36.70A RCW.
     (g) "Threshold amount" means the maximum amount of tax distributions as determined by the city in accordance with subsection (7) of this section that the department must distribute to the city generated from the tax imposed under this section in a fiscal year.

Sec. 2   RCW 82.14.500 and 2011 1st sp.s. c 50 s 974 are each amended to read as follows:
     (1)(a) In order to mitigate local sales tax revenue net losses as a result of the sourcing provisions of the streamlined sales and use tax agreement under this title, the state treasurer, on July 1, 2011, and each July 1st thereafter, must transfer into the streamlined sales and use tax mitigation account from the general fund the sum ((required to mitigate actual net)) anticipated to be required to make the distributions required in this section to partially mitigate annual losses as determined under this section.
     (b) During ((the 2011-2013 fiscal biennium)) fiscal year 2012, the amount that would otherwise be transferred under (a) of this subsection must be reduced by 3.4 percent.
     (c) During fiscal year 2013, the amount that would otherwise be transferred under (a) of this subsection must be reduced by 13.4 percent.
     (d) Beginning July 1, 2013, and each July 1st thereafter, the amount that would otherwise be transferred under (a) of this subsection must be reduced by ten percent.
     (2) ((Beginning July 1, 2008, and continuing until the department determines annual losses under subsection (3) of this section, the department must determine the amount of local sales tax net loss each local taxing jurisdiction experiences as a result of the sourcing provisions of the streamlined sales and use tax agreement under this title each calendar quarter. The department must determine losses by analyzing and comparing data from tax return information and tax collections for each local taxing jurisdiction before and after July 1, 2008, on a calendar quarter basis. The department's analysis may be revised and supplemented in consultation with the oversight committee as provided in subsection (4) of this section. To determine net losses, the department must reduce losses by the amount of voluntary compliance revenue for the calendar quarter analyzed. Beginning December 31, 2008, distributions must be made quarterly from the streamlined sales and use tax mitigation account by the state treasurer, as directed by the department, to each local taxing jurisdiction, other than public facilities districts for losses in respect to taxes imposed under the authority of RCW 82.14.390, in an amount representing its net losses for the previous calendar quarter. Distributions must be made on the last working day of each calendar quarter and must cease when distributions under subsection (3) of this section begin.
     (3)))(a) By December 31, 2009, ((or such later date the department in consultation with the oversight committee determines that sufficient data is available,)) the department must determine each local taxing jurisdiction's annual loss. The department must determine annual losses by comparing at least twelve months of data from tax return information and tax collections for each local taxing jurisdiction before and after July 1, 2008. The department is not required to determine annual losses on a recurring basis, but may make any adjustments to annual losses as it deems proper ((as a result of the annual reviews provided in (b) of this subsection)) until the effective date of this section. Beginning the calendar quarter in which the department determines annual losses, and each calendar quarter thereafter, distributions must be made from the streamlined sales and use tax mitigation account by the state treasurer on the last working day of the calendar quarter, as directed by the department, to each local taxing jurisdiction, other than public facilities districts for losses in respect to taxes imposed under the authority of RCW 82.14.390, in an amount representing one-fourth of the jurisdiction's annual loss reduced by voluntary compliance revenue reported during the previous calendar quarter.
     (b) ((The department's analysis of annual losses must be reviewed by December 1st of each year and may be revised and supplemented in consultation with the oversight committee as provided in subsection (4) of this section.
     (4) The department must convene an oversight committee to assist in the determination of losses. The committee includes one representative of one city whose revenues are increased, one representative of one city whose revenues are reduced, one representative of one county whose revenues are increased, one representative of one county whose revenues are decreased, one representative of one transportation authority under RCW 82.14.045 whose revenues are increased, and one representative of one transportation authority under RCW 82.14.045 whose revenues are reduced, as a result of RCW 82.14.490 and the chapter 6, Laws of 2007 amendments to RCW 82.14.020. Beginning July 1, 2008, the oversight committee must meet quarterly with the department to review and provide additional input and direction on the department's analyses of losses. Local taxing jurisdictions may also present to the oversight committee additional information to improve the department's analyses of the jurisdiction's loss. Beginning January 1, 2010, the oversight committee must meet at least annually with the department by December 1st.
     (5))) For fiscal year 2012, distributions to each local taxing jurisdiction, other than public facilities districts, must be reduced, as necessary, so that the cumulative amount distributed to the jurisdiction during the entire fiscal year is reduced by the lesser of 3.4 percent or the full amount of the last two quarterly distributions.
     (c) For fiscal year 2013, quarterly distributions to each local taxing jurisdiction, other than public facilities districts, must be reduced by 13.4 percent.
     (d) Beginning July 1, 2013, quarterly distributions to each local taxing jurisdiction, other than public facilities districts, must be reduced by ten percent.
     (3) The rule-making provisions of chapter 34.05 RCW do not apply to this section.

NEW SECTION.  Sec. 3   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.