AN ACT Relating to property taxes; amending RCW 39.67.010, 39.67.020, 84.55.092, 84.52.043, 84.52.100, and 84.52.010; adding a new section to chapter 84.52 RCW; adding a new section to chapter 52.04 RCW; creating new sections; and making an appropriation.

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

NEW SECTION. Sec. 1. The legislature finds that, due to statutory and constitutional limitations, the interdependence of the regular property tax levies of the state, counties, county road districts, cities and towns, and junior taxing districts can cause significant reductions in the otherwise authorized levies of those taxing districts, resulting in serious disruptions to essential services provided by those taxing districts. The purpose of this act is to avoid unnecessary reductions in regular property tax revenue without exceeding existing statutory and constitutional tax limitations on cumulative regular property tax levy rates. The legislature declares that it is a purpose of the state, counties, county road districts, cities and towns, public hospital districts, library districts, fire protection districts, metropolitan park districts, and other taxing districts to participate in the methods provided by this act by which revenue levels supporting the services provided by all taxing districts might be maintained.

Sec. 2. Section 1, chapter 107, Laws of 1986 and RCW 39.67.010 are each amended to read as follows:

Any agreement or contract between two taxing districts other than the state which is otherwise authorized by law may be made contingent upon a particular property tax levy rate of an identified taxing district other than the state where such rate affects the regular property tax rate of one of the parties to the contract and therefore affects the party's resources with which to perform under the contract. The governing body of every taxing district that could have its tax levy adversely affected by such a contract shall be notified about the contract.

((~~This section shall expire December 31, 1988.~~))

Sec. 3. Section 2, chapter 107, Laws of 1986 and RCW 39.67.020 are each amended to read as follows:

Any taxing district other than the state may transfer funds to another taxing district other than the state where the regular property tax levy rate of the second district may affect the regular property tax levy rate of the first district and where such transfer is part of an agreement whereby proration or reduction of property taxes is lessened or avoided. The governing body of every taxing district that could have its tax levy adversely affected by such an agreement shall be notified about the agreement.

((~~This section shall expire December 31, 1988.~~))

Sec. 4. Section 3, chapter 107, Laws of 1986 and RCW 84.55.092 are each amended to read as follows:

The regular property tax ((~~levies~~)) levy for each taxing district other than the state ((~~for taxes due in 1987 through 1991~~)) may be set at the amount which would ((~~otherwise~~)) be allowed otherwise under this chapter if the regular property tax levy for the district for taxes due in prior years beginning with 1986 ((~~and 1987~~)) had been set at the full amount allowed under this chapter.

((~~This section shall expire December 31, 1991.~~)) The purpose of this section is to remove the incentive for a taxing district to maintain its tax levy at the maximum level permitted under this chapter, and to protect the future levy capacity of a taxing district that reduces its tax levy below the level that it otherwise could impose under this chapter, by removing the adverse consequences to future levy capacities resulting from such levy reductions.

Sec. 5. Section 134, chapter 195, Laws of 1973 1st ex. sess. and RCW 84.52.043 are each amended to read as follows:

Within and subject to the limitations imposed by RCW 84.52.050 as amended, the regular ad valorem tax levies upon real and personal property by the taxing districts hereafter named shall be as follows:

(1) Levies of the senior taxing districts shall be as follows: (a) The levy by the state shall not exceed three dollars and sixty cents per thousand dollars of assessed value adjusted to the state equalized value in accordance with the indicated ratio fixed by the state department of revenue to be used exclusively for the support of the common schools; (b) the levy by any county shall not exceed one dollar and eighty cents per thousand dollars of assessed value; (c) the levy ((~~for~~)) by any road district shall not exceed two dollars and twenty-five cents per thousand dollars of assessed value; and (d) the levy by ((~~or for~~)) any city or town shall not exceed three dollars and thirty-seven and one-half cents per thousand dollars of assessed value((~~: PROVIDED FURTHER, That counties of the fifth class and under are~~)). However any county is hereby authorized to increase its levy from one dollar and eighty cents to a rate not to exceed two dollars and forty-seven and one-half cents per thousand dollars of assessed value for general county purposes ((~~and from one dollar and fifty-seven and one-half cents to two dollars and twenty-five cents per thousand dollars of assessed value for county road purposes~~)) if the total ((~~levy~~)) levies for both ((~~purposes does~~)) the county and any road district within the county do not exceed four dollars and five cents per thousand dollars of assessed value((: PROVIDED FURTHER, That counties of the fourth and the ninth class are hereby authorized to levy two dollars and two and one-half cents per thousand dollars of assessed value until such time as the junior taxing agencies are utilizing all the dollar rates available to them: AND PROVIDED FURTHER, That the total property tax levy authorized by law without a vote of the people shall not exceed nine dollars and fifteen cents per thousand dollars of assessed value)), and no other taxing district has its levy reduced as a result of the increased county levy.

(2) Except as provided in RCW 84.52.100, the aggregate levies of junior taxing districts and senior taxing districts, other than the state, shall not exceed five dollars and fifty-five cents per thousand dollars of assessed valuation. The term "junior taxing districts" includes all taxing districts other than the state, counties, road districts, cities, towns, port districts, and public utility districts. The limitations provided in this subsection shall not apply to: (a) Levies at the rates provided by existing law by or for any port or public utility district ((~~shall not be included in the limitation set forth by this proviso.~~

~~Nothing herein shall prevent levies at the rates provided by existing law by or for any port or power district~~)); (b) excess property tax levies authorized in Article VII, section 2 of the state Constitution; (c) levies for acquiring conservation futures as authorized under RCW 84.34.230; and (d) levies for emergency medical care or emergency medical services imposed under RCW 84.52.069.

(3) It is the intent of the legislature that the provisions of this section shall supersede all conflicting provisions of law including ((~~section 24, chapter 299, Laws of 1971 ex. sess. and section 8, chapter 124, Laws of 1972 ex. sess~~)) RCW 84.52.050.

Sec. 6. Section 7, chapter 138, Laws of 1987 and RCW 84.52.100 are each amended to read as follows:

(1) The governing body of any library district, public hospital district, metropolitan park district, or fire protection district may provide for the submission of a ballot proposition to the voters of the taxing district authorizing the taxing district to maintain its otherwise authorized tax levy rate, and authorizing an increase in the cumulative regular property tax limitation established in RCW 84.52.043 of ((~~nine~~)) five dollars and ((~~fifteen~~)) fifty-five cents per thousand dollars of assessed valuation within the taxing district, as provided in this section. A fire protection district may use this authority to increase its regular property tax levy up to fifty cents per thousand dollars of assessed valuation.

(2) A resolution by a governing body, requesting that a special election be called to submit such a ballot proposition to the voters, must be transmitted to the county legislative authority of the county, or county legislative authorities of the counties, within which the taxing district is located, at least forty-five days before the special election date at which the ballot proposition is submitted. The ballot proposition shall be worded substantially as follows:

"Shall the cumulative limitation on most regular property tax rates be increased by an amount not exceeding thirty-five cents per thousand dollars of assessed valuation for a five consecutive year period allowing (insert the name of the taxing district) to maintain its otherwise statutory authorized property tax rate?"

The ballot proposition for a fire protection district shall be worded substantially as follows:

"Shall the cumulative limitation on most regular property tax rates be increased by an amount not exceeding thirty-five cents per thousand dollars of assessed valuation for a five consecutive year period allowing (insert the name of the taxing district) to permit the fire protection district to impose its property tax at a value up to fifty cents per thousand dollars of assessed valuation?"

Approval of this ballot proposition by a simple majority vote shall authorize the following for the succeeding five consecutive year period: (a) Property tax rates of junior taxing districts are calculated first as if this proposition had not been approved; (b) subject to the one hundred six percent limitation, the regular property tax rate of the taxing district receiving such authorization is increased to a level not exceeding the lesser of: (i) Its maximum statutory authorized regular property tax rate; or (ii) whatever tax rate it otherwise would have been able to impose plus an additional thirty-five cents per thousand dollars of assessed valuation; and (c) the cumulative property tax rate limitation is increased within the boundaries of the taxing district receiving this authorization to an amount equal to ((~~nine~~)) five dollars and ((~~fifteen~~)) fifty-five cents per thousand dollars of assessed valuation plus the increased amount of the regular levy rate of this taxing district, but not to exceed ((~~nine~~)) five dollars and ((~~fifty~~)) ninety cents per thousand dollars of assessed valuation.

(3) If two or more taxing districts that occupy a portion of the same territory receive such approval, the additional authorized taxing capacity above ((~~nine~~)) five dollars and ((~~fifteen~~)) fifty-five cents per thousand dollars of assessed valuation shall be distributed among these taxing districts by adjusting their levy rate requests in the same manner and under the same conditions as if they were the only taxing districts in the area subject to adjustment of their property tax rates and the levy rate adjustments were being made with the cumulative limitation of ((~~nine~~)) five dollars and ((~~fifteen~~)) fifty-five cents per thousand dollars of assessed valuation.

(4) Levies authorized under RCW 84.52.069 are not subject to the rate adjustments and the ((~~nine~~)) five dollar and ((~~fifty~~)) ninety cent per thousand dollar of assessed valuation cumulative limitation on regular property tax rates established by this section.

Sec. 7. Section 84.52.010, chapter 15, Laws of 1961 as last amended by section 1, chapter 255, Laws of 1987 and RCW 84.52.010 are each amended to read as follows:

Except as is permitted under RCW 84.55.050, all taxes shall be levied or voted in specific amounts.

The rate percent of all taxes for state and county purposes, and purposes of taxing districts coextensive with the county, shall be determined, calculated and fixed by the county assessors of the respective counties, within the limitations provided by law, upon the assessed valuation of the property of the county, as shown by the completed tax rolls of the county, and the rate percent of all taxes levied for purposes of taxing districts within any county shall be determined, calculated and fixed by the county assessors of the respective counties, within the limitations provided by law, upon the assessed valuation of the property of the taxing districts respectively.

When a county assessor finds that the aggregate rate of tax levy on any property, that is subject to the limitations set forth in RCW 84.52.043 or 84.52.050, as now or hereafter amended, exceeds the limitations provided in either of these sections, the assessor shall recompute and establish a consolidated levy in the following manner:

(1) The full certified rates of tax levy for state, county, county road district, and city or town purposes shall be extended on the tax rolls in amounts not exceeding the limitations established by law((: PROVIDED, That in the event of a levy made pursuant to RCW 84.34.230, the rates of levy for county and county road district purposes shall be reduced in such uniform percentages as will result in a consolidated levy by such taxing districts which will be no greater on any property than a consolidated levy by such taxing districts would be if the levy had not been made pursuant to RCW 84.34.230)), subject to subsection (2)(e) of this section; however any state levy shall take precedence over all other levies and shall not be reduced for any purpose other than that required by RCW 84.55.010; and

(2) The certified rates of tax levy subject to these limitations by all junior taxing districts imposing taxes on such property shall be reduced or eliminated as follows to bring the consolidated levy of taxes on such property within the provisions of these limitations:

(a) First, the certified property tax levy rates of those junior taxing districts authorized under RCW 36.68.525, 36.69.145, and 67.38.130 shall be reduced on a pro rata basis or eliminated;

(b) Second, if the consolidated tax levy rate still exceeds these limitations, the certified property tax levy rates of flood control zone districts shall be reduced on a pro rata basis or eliminated;

(c) Third, if the consolidated tax levy rate still exceeds these limitations, the certified property tax levy rates of all other junior taxing districts, other than fire protection districts, public hospital districts, metropolitan park districts, and library districts, shall be reduced on a pro rata basis or eliminated;

(d) Fourth, if the consolidated tax levy rate still exceeds these limitations, the certified property tax levy rates authorized to fire protection districts under RCW 52.16.140 and 52.16.160 shall be reduced on a pro rata basis or eliminated; ((~~and~~))

(e) Fifth, if the consolidated tax levy rate still exceeds these limitations, the certified property tax levy rates authorized for cities and towns, fire protection districts under RCW 52.16.130, public hospital districts, metropolitan park districts, and library districts shall be adjusted as provided in section 8 of this 1988 act; and

(f) Sixth, if the consolidated tax levy rate still exceeds these limitations, the certified property tax levy rates authorized to fire protection districts under RCW 52.16.130, and the certified property tax levy rates of public hospital districts, metropolitan park districts, and library districts, shall be reduced on a pro rata basis or eliminated.

NEW SECTION. Sec. 8. A new section is added to chapter 84.52 RCW to read as follows:

(1) In any county, if, after any reduction in levy rates required by RCW 84.52.010(2)(a) through (d), the consolidated tax levy rate still exceeds the limitations in RCW 84.52.043 or 84.52.050, then the department pursuant to rules shall direct the county assessor to adjust the regular property tax levy rates in the following manner:

(a) First, the assessor determines a first preliminary rate pursuant to RCW 84.52.010(2)(f).

(b) Second, the assessor determines a second preliminary rate which is the additional rate, if any, permitted by RCW 84.52.100.

(i) If the preliminary rates together are sufficient to permit all rates subject to RCW 84.52.010(2)(f) to be levied without reduction, then the assessor shall extend on the tax rolls the full certified rates pursuant to RCW 84.52.010(2)(f) and 84.52.100.

(ii) If the preliminary rates together are not sufficient to permit all rates subject to RCW 84.52.010(2)(f) to be levied without reduction pursuant to both RCW 84.52.010(2)(f) and 84.52.100, the assessor shall reduce the rate of the taxing district subject to RCW 84.52.010(2)(e) with the smallest assessed valuation such that, after first allowing for any additional rate permitted by RCW 84.52.100, there is no reduction of the rates under RCW 84.52.010(2)(f). Where the reduction of the levy of a taxing district is not sufficient, the taxing district with the next smallest assessed valuation shall have its levy reduced under this subsection until there is no reduction of rates under RCW 84.52.010(2)(f). The assessor shall then extend on the tax rolls the rates derived pursuant to this subsection (b)(ii).

(2) The taxing districts whose levies would have been reduced but for subsection (1) of this section shall pay to each district that had its levy so reduced pursuant to subsection (1) of this section a proportionate share of the reduced amount based on the amount by which each district would have had its total levy rate reduced if subsection (1) of this section were not in effect and the rates had been adjusted pursuant to RCW 84.52.010(2)(f) and 84.52.100.

(a) In the case of a public hospital district, library district, fire protection district, or metropolitan park district whose levy is reduced under subsection (1) of this section, the district shall bear a proportionate share as if its rate were sufficient to collect its certified levy.

(b) In the case of a city or town that is annexed by a library district or a fire protection district, which city's or town's levy is reduced under this section, or is in a tax code area where a levy rate is reduced under this section, the city or town shall forgo receipt of, or pay to each district whose levy rate is reduced, ten percent of the amount which would otherwise be paid to the city or town from each district whose levy rate is not reduced as a result of subsection (1) of this section, collectively not to exceed one-half of the following amount: The assessed valuation of the reduced district multiplied by a rate equal to the city's or town's levy rate, calculated based on its certified levy request, plus the rate(s) of the annexing district(s) minus the rate the city or town would have been able to levy were it not annexed, not to exceed twenty-two and one- half cents.

(3) Fifty-five percent of the amount under subsection (2) of this section shall be distributed on or before May 31 of the tax collection year for which the levy is reduced and forty-five percent on or before November 30 of that year.

(4) This section shall expire on December 31, 1989.

NEW SECTION. Sec. 9. The department of revenue shall adopt such rules consistent with this act as shall be necessary or desirable to permit its effective administration. The rules shall provide how section 8 of this act shall apply to a taxing district that has received authorization to increase its levy according to RCW 84.52.100 and use the method that will be the least costly to all taxing districts involved.

NEW SECTION. Sec. 10. There is created in the custody of the state treasurer an account to be known as the "small county assistance account." Effective July 1, 1988, and notwithstanding RCW 43.84.092, one-half of the investment income earned on moneys in the local sales and use tax account created by RCW 82.14.050 and which has not been distributed according to RCW 82.14.060 shall be placed into this account. Any moneys in the account on December 31, 1989, shall be transferred to the general fund.

The state treasurer shall disburse moneys from this account, upon certification by the director of revenue, to each fifth class and smaller county that contracts with, or transfers funds to, a taxing district or districts under RCW 39.67.010 or 39.67.020 if, as a result of the contracts or transfers, the county is able to increase its county-wide general tax levy above one dollar and eighty cents per thousand dollars of assessed valuation, in accordance with RCW 84.52.043.

Each eligible county shall receive an amount of money from this account that is equal to the amount that the county transfers or pays to the other taxing district or districts. One-half of the distributions shall be made to each eligible county on or before April 30, 1989, and one-half of the distributions shall be made to each eligible county on or before October 31, 1989. These amounts shall be proportionally reduced if the moneys in the account are insufficient to reimburse the full amount that these counties transferred or paid to such taxing districts. Distributions from this account are not subject to appropriation.

Each county that so transfers or pays moneys to taxing districts shall provide evidence of such arrangements to the director of revenue on or before January 31, 1989. The director of revenue shall certify to the state treasurer each county that is eligible for such disbursements and the amount that the county so transferred or paid.

This section expires January 1, 1990.

NEW SECTION. Sec. 11. The sum of one hundred thousand dollars is appropriated for the biennium ending June 30, 1989, from the general fund to the small county assistance account to be used exclusively for purposes specified in section 10 of this act.

NEW SECTION. Sec. 12. A new section is added to chapter 52.04 RCW to read as follows:

Any attempted annexation in 1987 and thereafter by a fire protection district of contiguous territory, that is located in a county other than the county in which the fire protection district was located, is validated where the annexation would have occurred if the territory had been located in the same county as the fire protection district. The effective date of such annexations occurring in 1987 shall be February 1, 1988, for purposes of establishing the boundaries of taxing districts for purposes of imposing property taxes as provided in RCW 84.09.030.

Any reference to a county official of the county in which a fire protection district is located or proposed to be located shall be deemed to refer to the appropriate county official of each county in which the fire protection district is located or proposed to be located.

NEW SECTION. Sec. 13. 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.