HOUSE BILL REPORT

2SSJR 8212

BYSenate Committee on Ways & Means (originally sponsored by Senators Lee, Williams and Fleming)

Amending the Constitution to allow property devoted to low-income housing to be taxed based on its current use value.

House Committe on Housing

Majority Report:  Do pass as amended.  (7)

      Signed by Representatives Nutley, Chair; Leonard, Vice Chair; Winsley, Ranking Republican Member; Anderson, Padden, Rector and Todd.

House Staff:Kenny Pittman (786-7392)

Rereferred House Committee on Revenue

Majority Report:  Do pass as amended by Committee on Housing.  (11)

      Signed by Representatives Wang, Chair; Pruitt, Vice Chair; Appelwick, Basich, Fraser, Grant, Morris, Phillips, Rust, Silver and H. Sommers.

House Staff:      Rick Wickman (786-7150)

AS PASSED HOUSE FEBRUARY 27, 1990

BACKGROUND:

Under the state constitution, real property must be taxed according to the valuation of its highest and best use.  Exceptions to this rule are listed in Article VII, Section 11 of the state constitution. The exceptions include farm and agricultural land, standing timber and timberlands, and open space lands.

Taxing residential real estate at highest and best use, particularly multifamily residential housing located in commercial areas, encourages owners to redevelop their property to secure the highest possible revenue in order to cover the tax burden.  This rule discourages owners of low-income housing located in commercial areas from maintaining their property for that use.

Any changes to the classification of property for taxation purposes will require a constitutional amendment, approved by a vote of the public.

SUMMARY:

A constitutional amendment to Article VII, Section 11 of the constitution of the state of Washington to allow property with buildings that are devoted primarily to low-income housing, containing five or more low-income dwelling units, and that complies with health and safety standards and property used for mobile home parks will be submitted to the voters in November, 1990.  If approved, real property meeting these requirements will be valued at its current use value rather than its true and fair market value for property tax purposes.

Revenue:    This bill has a revenue impact.

Fiscal Note:      Available.

House Committee ‑ Testified For:    (Housing)  Bernie Ryan, King County Assessor's Office; Mike Ryherd, Low Income Housing Congress (with comment); and Ron Main, King County Council.

(Revenue)  Representative Busse Nutley; Mike Ryherd, Low Income Housing Congress; and Cheryl Chow, City of Seattle.

House Committee - Testified Against:      (Housing)  No one.

(Revenue)  No one.

House Committee - Testimony For:    (Housing)  The bill will provide an incentive to owners to keep housing for low-income use.  This is a least cost method that should be supported. However, the bill should be amended as not to require the property to be totally occupied by low-income persons to qualify under the program.  This would encourage mixing of incomes.  There would not be a revenue loss to the local taxing districts, only a shift of the tax burden to other uses.  This shift would result in minimal increases in property taxes.  Tax loss would only occur if the taxing district is already at its maximum levy amount.

(Revenue)  A constitutional amendment is necessary to allow citizens to vote on the issue of authorizing current use property tax assessments for properties devoted to low income housing.

House Committee - Testimony Against:      (Housing)  None.

(Revenue)  None.

VOTE ON FINAL PASSAGE:

      Yeas 92; Nays 2; Excused 4 - 2/27

Voting Nay: Representatives Fuhrman and Holland

Excused:    Representatives Chandler, Doty, Moyer and Zellinsky