Municipal Finance & Economic Development

Streamlined Sales Tax Update

The House Finance Committee held a very positive work session Friday, December 2 on the Streamlined Sales Tax issue. Thanks to David Moseley, Federal Way City Manager, and Jay Covington, Renton Chief Administrative Officer, who represented the city position at the hearing and expressed our desire for passage of SST legislation with full mitigation in 2006. Panels from the Department of Revenue, counties and business representatives all addressed the Committee with similar messages about their support for passage of a bill this session to bring Washington in compliance with the streamlined sales tax agreement and gave credit to cities for reaching an agreement on this issue earlier this fall.

We continue to meet with DOR and have crafted a document with DOR outlining how mitigation will be provided in the legislation: www.awcnet.org/documents/mitigationconcept.pdf (pdf, 17 kb). We just received a bill draft from DOR and will forward it to cities for comments.

We have met with the Governor’s Chief of Staff and the Office of Financial Management Director and Legislative Director to outline the cities’ interest and desire for SST legislation. County and business representatives attended the same meeting and also endorsed SST legislation and the Governor’s advancement of a bill. The Governor has not yet made a decision if she will advance SST legislation, but we expect a decision later this month. If she does advance a bill it may not include full mitigation. We will continue to press for full mitigation.

The National Association of Industrial and Office Properties have expressed a concern that passage of SST legislation provides a disincentive for cities to house warehouses. The mayors of those cities with significant warehouse activities participated in a meeting with representatives from NAIOP and also sent a letter to Governor Gregoire with assurances that no immediate land use changes were anticipated and now was the time to focus on passage of SST legislation that included full mitigation. A copy of the letter is available on AWC’s website: www.awcnet.org/documents/111805SSTltr9signatures.pdf (pdf, 51 kb).

We will continue to meet with legislators and others as we advance legislation that the entire city family will support during the 2006 session. Our efforts will be guided by the AWC SST principles. Please see AWC’s website, www.awcnet.org/streamlinedtax, for a complete copy of the principles.

To keep cities informed on this issue until AWC starts sending its weekly Legislative Bulletins in January, AWC sent the first in a series of short e-mail updates on the issue to cities last week. If you did not receive the update and would like to receive future copies, please contact Sheila Gall at sheilag@awcnet.org.

For further information on this issue, see the AWC website www.awcnet.org/streamlinedtax or contact Jim Justin at jimj@awcnet.org or Sheila Gall at sheilag@awcnet.org.

House Finance Committee Hearings on Local Government Finance

The House Finance Committee held the third in a series of hearings on local government finances on Monday, November 14 in Ellensburg. Thanks to Mayor Kathy Bohnet, Wilson Creek; John Sherman, Pullman; and Ted Barkley, Ellensburg, for sharing their cities’ challenges and perspectives with the committee.

AWC appreciates the time that Chair Jim McIntire (D-Seattle) and the committee members took this fall to travel to different areas of the state to visit communities and hear the concerns of city officials. City officials reminded the committee that despite the State’s positive revenue forecast, the economy has not "turned around" everywhere and that cities throughout the state have diverse needs that require different solutions.

B&O Tax Allocation and Apportionment Study Update

The Department of Revenue’s report on the impacts and potential options to address the $23 million loss to the 40 B&O tax cities from allocation and apportionment provisions that go into effect in January 2008, is not yet available but is expected soon. A subset of city and business representatives continue to meet regarding preliminary discussions on a joint proposal for addressing the impacts of apportionment and a centralized city-based system for local B&O tax administration. We will keep you informed as these preliminary discussions move forward.

Job Development Fund Grant Applications Available -- Pre-Application Deadline is January 6, 2006

The Community Economic Revitalization Board's (CERB) solicitation for Job Development Fund grant applications was sent to cities on December 1, 2005. AWC sent an e-mail to city officials with links to the grant guidelines and application forms earlier this week with a reminder that the pre-application deadline, which is required for cities wishing to submit a full application, is January 6, 2006.

The Job Development Fund was created last session by ESHB 1903 with the purpose of financing public facilities projects that directly stimulate economic development by supporting the creation of new jobs or retention of existing jobs.

CERB expects the 2007 Legislature to approve up to $49.5 million for this program in the 2007-2009 Biennium.

For more information about the Job Development Fund Program or to obtain program guidelines and application materials, please contact staff at cerbjdf@cted.wa.gov, (360) 725-4049, or visit CERB's website at www.cted.wa.gov/cerb.

Roundtable Meeting on DOR Strategic Business Plan

A number of city officials traveled to Olympia in November to take part in the Department of Revenue’s local government roundtable meeting. Cities appreciated the opportunity to share city concerns and ideas for further partnerships with senior members of the Department of Revenue, including Director Cindy Yates. We look forward to reviewing the findings of the stakeholder meetings as DOR moves forward in developing its strategic business plan.

Department of Revenue Updates ESSB 6050 Estimates for January 2006

The Department of Revenue (DOR) has released preliminary updated estimates of distributions for January 2006 under ESSB 6050 based on new REET revenue collections and estimates. Due to continued growth in real estate sales, the revenue collections may exceed earlier projections, and distributions could be closer to $2 million for cities for January 2006 alone (up from $1.4 million estimated earlier this fall).

For those cities that are currently scheduled to receive more than $25,000 in distributions per quarter next year, please note that there is an annual cap of $100,000, and that the fourth quarterly distribution will be reduced if your city reaches the cap.

In addition, the funding source, state Real Estate Excise Tax (REET), can be volatile, and final distributions will be based on actual collections each quarter.

Master Business License Grants

Last session the Legislature approved HB 2131 which established a grant program for cities that wish to participate in the Department of Licensing Master Business License program. Look for further details on the grant program to be released in January.

New Local REET for Infrastructure - New Revenue Estimates Available

Last year the legislature considered SHB 2196 that would have authorized local governments to impose an additional 0.4% REET to be used for local infrastructure projects. While the bill did not pass in 2005 and key legislators have expressed that such a proposal is unlikely to pass in the short 2006 session they want to at least continue working on the issue in preparation for 2007.

As part of that effort AWC has developed new city-by-city estimates of the revenues that could be generated through a new 0.4% REET. The estimates are based upon recently released 2004 REET collection data that cities submitted to the State Auditor. They are available on our website at www.awcnet.org/documents/REETestimates.pdf (pdf, 113 kb). If you have questions about the estimates contact Dave Catterson at AWC: davec@awcnet.org, or 1-800-562-8981.