Changes affecting the city-county assistance account (HB 1667/SB 5511) – AWC Priority

In December 2008 the Joint Legislative Audit and Review Committee (JLARC) released a report concerning distributions from the city-county assistance account (account). JLARC was directed to produce this report as a result of the legislation passed in 2005, ESSB 6050, which created the account. HB 1667 and SB 5511 are by request of the Department of Revenue (DOR) to implement some of the recommendations of the JLARC report.

Cities qualifying for distributions from the account do so based on a formula that considers per capita sales tax revenues and per capita property assessed valuation. JLARC’s report to the Legislature recommended that DOR provide information on the interaction between streamlined sales tax (SST) mitigation funding and 6050 account distributions. In order to rectify any "double dipping" that could occur, these companion bills would change the formula so that the sum of sales tax revenues and any funds received from streamlined sales tax mitigation are used to determine eligibility.

In their report, JLARC also noted that the Legislature should change the date for certification of distributions in order to allow DOR to use prior year’s property assessed valuation data as specified in statute (because of timing issues DOR currently uses assessed valuation data that is two years old).

Currently certification is done annually in March with the first distribution in April. This means during the budgeting process cities must estimate eligibility amounts as well as real estate excise tax activity since the account is funded by the REET. In our response to the preliminary JLARC report, AWC asked that any changes in certification dates be made so cities can use eligibility information when developing their budget for the following year. Therefore AWC worked with DOR so the date of final certification is changed to October, with the first distribution taking place in January.

Neither of these bills has been scheduled for a hearing at this time.

Taxation of brokered natural and manufactured gas (HB 1422) – AWC Priority

Last week legislation was introduced clarifying the intent of the brokered natural gas use tax. HB 1422 clarifies "use" for natural/manufactured gas as the first act within the state by which the taxpayer consumes the gas by burning or storing the gas in the taxpayer’s own facility for later consumption. See last week’s Bulletin for a complete description of the need for the bill.

This bill is scheduled for public hearing in the House Finance Committee on Thursday, February 5.

Eliminating various accounts (HB 1453/SB 5408)

These companion bills were introduced by request of the Office of Financial Management. The bills eliminate the following accounts:

Health services account
Violence reduction and drug enforcement account
Water quality account

Funds that would otherwise be deposited into these accounts would be moved to the state general fund. Some believe elimination of the accounts makes it easier to eliminate or reduce the funds for the specified purpose.

HB 1453 is scheduled for public hearing in the House Ways & Means Committee on Thursday, February 5 and SB 5408 is scheduled for public hearing in the Senate Ways & Means Committee on Tuesday, February 3.

Addressing fiscal matters for the 2007-09 biennium (HB 1694)

On Wednesday, January 28 Rep. Kelli Linville’s (D-Bellingham) proposed second supplemental budget passed out of the House Ways & Means Committee. This supplemental budget is similar to the Governor’s.

In addition to efficiency savings at many agencies, it makes select cuts to existing programs including:

GMA grants for technical assistance;
One-stop permitting project for transportation and other projects; and
Suspends the family leave insurance computer system.

It also allocates approximately $85 million more for the state’s reserves than the Governor’s proposed budget.

The Legislature will continue to advance budget cuts in the current biennium to assist with the development of the next biennium’s budget. For more information visit AWC’s website.

Extending the annexation sales tax credited against the state sales tax (SB 5321)

Currently cities in King, Snohomish and Pierce counties, except Seattle, that annex an area with more than 10,000 residents prior to January 1, 2010, can receive a sales and use tax credit to help cover the gap between the cost of providing services in this area and revenues that the annexation area would otherwise generate.

SB 5321 would change the dates of qualifying annexations to those that commence before January 1, 2010 or between the period of January 1, 2011 through January 1, 2021. Cities would be able to receive a credit of 0.1% for annexed areas with a population between 10,000 and 20,000 and 0.2% for areas with more than 20,000. The maximum cumulative rate a city could impose would be 0.2%.

The bill would also allow Seattle to qualify for the credit, but at the rate of 0.0034% for the total number of annexed areas.

SB 5321 is scheduled for public hearing in the Senate Ways & Means Committee on Wednesday, February 4.

Repealing nonresident exemptions from tax on retail sales (HB 1387)

On Tuesday, February 3 the House Finance Committee will hear HB 1387, which repeals the nonresident exemptions for the retail sales tax. The act would become effective on October 1, 2009.

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