Modifying local option taxes (2SSB 5433)

On Friday, March 27 the House Finance Committee passed a striking amendment to 2SSB 5433, a bill that now includes a number of priority city issues. This bill, which was profiled in the cover story of last week’s Bulletin, is now awaiting action by the House Rules Committee.

The bill as it passed out of Committee would:

Allow local governments greater flexibility in how they use revenues from the voter-approved 0.3% public safety sales and use tax and multi-year levy lid lifts;
Allow counties to levy a utility tax in the unincorporated portion of the county and allow cities to levy a utility tax on water/sewer districts providing services in their city;
Require cities and towns within King County to annex proposed annexations areas of greater than 4,000 population by the end of 2014 or forgo applications to the Public Works Trust Fund or Transportation Improvement Account (incentives for large annexations are included in ESSB 5321);
Allow counties to partially supplant existing funds raised by the mental health/chemical dependency sales and use tax until 2015;
Limit the ferry district property tax rate in King County to 7.5 cents per $1000 of assessed value and authorize an additional property tax in King County at the same rate to fund transit projects;
Require the state auditor to conduct a performance audit of King County;
Clarify the definition of "use" for the city brokered natural gas use tax which results in retaining approximately $14 million (2008 collections) for the nearly 50 cities that levy this tax; and
Allow the purposes of the 2^nd 0.25% locally collected real estate excise tax to match the 1st 0.25% locally collected real estate excise tax and allow smaller cities and counties to use this revenue for park maintenance and operation expenditures under restricted circumstances.

Some of these new authorities would be temporary. For example, the 0.3% public safety and county 0.1% mental health/chemical dependency sales taxes could be partially supplanted until 2015.

This bill is now our best vehicle to advance many priority city issues that died earlier in the session. Over the next few weeks your support of this bill will be critical in moving it forward. Please contact your representatives and ask them to support 2SSB 5433.

Modifying existing sales and use tax exemptions related to certain electricity generation (E2SHB 1009)

On Wednesday, March 25, the Senate Committee on Environment and Water & Energy passed a striking amendment to E2SHB 1009. Whereas earlier versions of this bill would have provided a refund against the state sales and use tax for certain machinery and equipment used to generate electricity, the striking amendment includes local sales tax in the exemption. The exemption would be equal to 75% of the sales tax paid until June 30, 2013, and then from July 1, 2013 through June 30, 2020 the amount of the exemption would be equal to 50 percent of the sales tax.

The Department of Revenue estimates that the local government fiscal impact of this bill would be a negative $6M annually until fiscal year 2014, when it decreases to $4M annually. We anticipate most of the local reduction would be incurred by counties but we continue to do our research.

Sales and use tax exemption for livestock nutrient management equipment and facilities (ESHB 2278)

ESHB 2278 would provide a sales and use tax exemption for livestock nutrient management equipment and facilities. This bill was heard in the Senate Ways & Means Committee on Thursday, April 2.

The fiscal impact to cities is estimated to be a negative $297,000 per biennium. While this may not represent a significant impact, smaller and rural communities could be impacted disproportionately. If your city is concerned about this exemption, please contact Alicia Seegers Martinelli at (360) 753-4137 or aliciam@awcnet.org.

Sales and use tax exemption of the nonhighway use of propane by farmers (SHB 2323)

SHB 2323 was introduced on Wednesday, March 25, heard in the House Finance Committee on Thursday, April 2 and passed out of Committee the following day. This bill would exempt 50% of the selling price of propane fuel used by farmers for non-highway farm activities from the sales and use tax until July 1, 2015.

A fiscal note is yet complete on the substitute bill, but again AWC believes this exemption could impact smaller and rural communities disproportionately. If your city is concerned about this exemption, please contact Alicia Seegers Martinelli at (360) 753-4137 or aliciam@awcnet.org.

Concerning the annexation sales and use tax (ESSB 5321)

ESSB 5321 would extend and make changes to the current sales and use tax credit that most cities in King, Pierce and Snohomish Counties are eligible to receive when they conduct large annexations above 10,000 in population (one change is that Seattle would become eligible). This bill is intended to provide cities in those counties an incentive to annex large areas.

ESSB 5321 passed out of the House Finance Committee on Friday, March 27. See the March 20 Bulletin for specific information about this bill.

Recommendations from the task force on the underground economy (SHB 1555)

See the General Local Government section of this Bulletin for more information on this bill.

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