HOUSE BILL REPORT

SB 6671

As Amended by the House

BYSenator Lee

Specifying funds that may be retained for administration of the housing trust fund.

House Committe on Housing

Majority Report:  Do pass with amendment.  (9)

      Signed by Representatives Nutley, Chair; Leonard, Vice Chair; Armstrong, Barnes, Padden, Sanders, Todd, J. Williams and Wineberry.

House Staff:Kenny Pittman (786-7392)

Rereferred House Committee on Ways & Means/Appropriations

Majority Report:  Do pass with amendment by Committee on Housing.  (15)

      Signed by Locke, Chair; Belcher, Brekke, Butterfield, Ebersole, Grant, Hine, Holland, McLean, Nealey, Peery, H. Sommers, Spanel, Wang and B. Williams.

House Staff:      Susan Kavanaugh (786-7136)

AS PASSED HOUSE MARCH 3, 1988

BACKGROUND:

The Washington Housing Trust Fund (Trust Fund) was created in 1986 to provide a source of funds to meet the basic housing needs of low-income persons, persons in rural areas, and persons with special housing needs.  The Legislature would be responsible for authorizing funding for the Trust Fund from a variety of renewable public and private sources.

In 1987, the Legislature authorized initial funding for the Trust Fund through interest on real estate earnest money deposits, placed in pooled interest bearing accounts, that were defined as short-term or nominal.  Generally a short-term or nominal deposit is a deposit that would not produce positive net income (after expenses) if the deposit were placed in an individual or separate account.  The revenue from the pooled real estate earnest money deposit accounts is divided so that the Trust Fund Account receives 75 percent and the Real Estate Commission Account receives 25 percent for educational programs.

The Department of Community Development (DCD) is responsible for the administration of the Trust Fund program.  DCD is authorized to use up to five percent of the annual revenue in the Trust Fund account for appropriate costs in administering the Trust Fund. In 1987, the Broker's Trust Account Board was created to assist DCD in administering the Trust Fund, and to assists the Real Estate Commission regarding educational programs.

The current revenue levels in the Trust Fund account is inadequate to fund the administrative costs to operate the program.  As additional annual revenue is generated from the funding sources, the five percent limit on DCD's appropriate administrative cost of should be adequate.

An excise tax is assessed on the sale of real property.  The tax must be paid within 30 days of the sale, or interest is charged at the rate of one percent of the tax owed per month.  The seller is generally responsible for paying the excise tax, although the tax owed and the one percent per month interest become a lien on the property sold.

SUMMARY:

Nominal or short-term deposits are referred to as nominal deposits and are defined as any deposit that is not more than $5,000.

Transaction costs of the financial institutions, which can be deducted from the interest earned on the deposits, are clarified as appropriate service charges and fees.

If the parties to the transaction agree, deposits in excess of $5,000 and not considered nominal may be placed in the pooled interest-bearing trust account with the interest divided between the Trust Fund Account (75%) and the Real Estate Commission Account (25%).

The five percent limit on appropriate administrative costs of the Department of Community Development (DCD) in the Washington State Housing Trust Fund (Trust Fund) is removed for a two year period. DCD, for necessary funds for program start-up, is authorized to utilize up to thirty-seven thousand five hundred dollars in the fiscal year ending June 30, 1988 and up to seventy-five thousand dollars in the fiscal year ending June 30, 1989, from annual revenue in the Trust Fund account.  Beginning in fiscal year 1990, the five percent limitation on administrative costs, based on annual revenue in the trust fund account is back in effect.

Penalties for the late payment of real estate excise taxes are added and the revenue will go to the Trust Fund.  In addition to the interest of one percent per month on excise tax due and not paid within thirty days of the sale of real property, if the tax is not paid within thirty days of the sale, a penality of five percent of the tax owed is assessed; if not paid within sixty days, the total penality is ten percent; if not paid within ninety days, the total penalty is twenty percent.  The additional penalties must be collected from the seller.

The provisions requiring the Broker's Trust Account Board to review and approval of loan and grant applications funded with revenue generated from real estate earnest money deposits placed in the Trust Fund is recodified into the Washington State Housing Trust Fund provisions.

Fiscal Note:      Available.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    (Housing)  None Presented.

(Ways & Means/Appropriations)  None Presented.

House Committee - Testified Against:      (Housing)  None Presented.

(Ways & Means/Appropriations)  None Presented.

House Committee - Testimony For:    (Housing)  None Presented.

(Ways & Means/Appropriations)  None Presented.

House Committee - Testimony Against:      (Housing)  None Presented.

(Ways & Means/Appropriations)  None Presented.