AWC Legislative Bulletin - Volume 30, No. 8
February 23, 2007
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In this issue:
What You Need to Know Now
From the Director: Legislature Approaches First Cutoff
Energy & Telecommunications
Environment & Water
General Local Government
Infrastructure, Transportation & Economic Development
Land Use & Housing
Law & Justice
Municipal Finance
Personnel & Labor Relations
Online Legislative Advocacy Tools
AWC Legislative Contacts & Officers
Municipal Finance
AWC Priority
Property Tax Limits (HB 2309)
HB 2309, introduced by Rep. Geoff Simpson (D-Covington), is scheduled for public hearing by the House Finance Committee on Monday, February 26 at 6 pm. The bill would give taxing districts, other than the state, the ability to increase property taxes to 101% or 100% plus inflation, whichever is greater (inflation would be determined by the implicit price deflator or IPD).
Because this issue is pending with the State Supreme Court, sections of the bill also make technical changes that reenact and then repeal sections of the existing law establishing the 101% limit. This bill is an AWC priority and we will ensure testimony is supportive of the bill.
Companion bills HB 1342 and SB 5647 would offer cities additional flexibility when using hotel/motel revenues. See last week’s Bulletin for more information. SB 5647 passed out of the Senate Committee on Economic Development and Trade & Management on February 21 with a minor helpful amendment.
On February 19, SHB 1254 passed out of the House Committee on Community & Economic Development & Trade. This substitute bill would give cities less flexibility than the previously-mentioned bills, expanding the definition of "tourism-related facility" to include 501(c)(6) nonprofit organizations but not 501(c)(3) organizations.
City officials are encouraged to call their senators asking for their support of SB 5647.
AWC Priority
Increasing the City-County Assistance Account (HB 2022)
HB 2022, which would provide an additional $10 million annually for the city-county assistance account, is currently in the House Appropriations Committee. See the February 9 Bulletin for more information. While there is some legislative support for this bill it is not likely to move unless city and county officials contact members of the Appropriations Committee asking for passage of the bill. Please contact Appropriations Committee members today.
AWC Priority
Local Sales & Use Tax for Criminal Justice Purposes (HB 1851)
This bill would give cities councilmanic decision-making authority to levy an additional one-tenth of one percent sales and use tax to pay for criminal justice services. See the February 9 Bulletin for more information.
The bill was heard by the House Finance Committee on February 14. Cities supporting HB 1851 are encouraged to contact their legislators, specifically members of the House Finance Committee, asking for passage of the bill.
AWC Priority
Multi-Family Ten Year Property Tax Exemption (HB 1737, SSB 5404, HB 1910)
Cities above 30,000 in population and the largest city in a GMA-planning county have the ability to provide a ten-year exemption from all property taxes for multi-family housing in an urban center. A number of cities have found this tool very helpful in meeting downtown density goals.
AWC’s preferred bill, HB 1737, would simply lower the population threshold to 5,000 and allow a partial exemption to be used for rental properties, currently only authorized for owner-occupied units. This bill was heard by the House Housing Committee on February 5.
SSB 5404, which would lower the population threshold to 15,000 and require an affordability component, was referred to the Senate Ways & Means Committee on February 5 with changes made to the affordability component.
HB 1910, identical to SSB 5404, would also lower the population threshold to 15,000 and require an affordability component.
In the House, there is a strong desire by key legislators to include an affordability component in this legislation. While AWC fully supports expansion of options to increase affordable housing, we have concerns that certain modifications to this very valuable growth management tool will hinder cities’ ability to increase downtown density.
It is likely HB 1910 will be the bill that moves forward this session. AWC will continue working to lower the population threshold below 15,000 and will also continue to review and attempt to modify proposed affordability requirements to ensure that this valuable tool is not damaged.
Please contact Jim Justin, jimj@awcnet.org, if you have any comments or questions on these bills.
Authorizing Property Tax Increases for Infrastructure (HB 2334)
HB 2334, sponsored by Rep. Mark Ericks (D-Bothell), has been introduced. The bill would allow cities to increase property taxes to 100% plus the implicit price deflator (IPD) in lieu of imposing impact fees. Property taxes in excess of 101% would be for infrastructure system improvements before any other purposes. The state would use property tax revenues in excess of 101% for school construction in high growth school districts.
Objections to Issuance of Liquor Licenses (HB 2113)
HB 2113 would require the Liquor Control Board to give substantial weight to objections by cities and counties to issuance or renewal of liquor licenses. The board would be required to take into account public safety or health violations, high numbers of citations, and unreasonably high use of local police resources. The bill is scheduled for hearing Monday, February 26 at 8 pm in the House Commerce & Labor Committee.
AWC Priority
Streamlined Sales Tax (SSB 5089/SHB 1072)
SSB 5089 passed out of the House Finance Committee on February 23.
All cities are encouraged to contact their House members to ask them to bring SSB 5089 to the floor for a vote and to remind them of city support for passage of streamlined sales tax legislation with full mitigation this year. See below for more information.
How SST Mitigation Will Work
A number of cities have inquired about how mitigation will work, and this issue came up during AWC’s legislative conference last week. Here is a brief explanation.
The sourcing changes only practically affect businesses in which goods are delivered to customers. The change will not impact businesses where customers pick up goods at the counter.
The effective date in SSB 5089 is July 1, 2008. This will give the Department of Revenue a little more than a year to collect data on sales tax collections under the current law and to provide education to businesses involving delivered goods about their required changes to destination based sourcing so that sales taxes will be correctly coded.
Mitigation will be based on actual sourcing-based losses to cities, less the amount of new sales tax revenues to the city from remote sales and voluntary compliance. The voluntary compliance revenues will be from out-of-state remote sellers who have signed up to voluntarily collect sales taxes on behalf of the member state of the streamlined sales tax agreement and who would not otherwise have nexus in Washington and not be required to collect sales tax.
As remote sales and voluntary compliance revenues increase, the amount of mitigation will decrease for each jurisdiction. Voluntary compliance revenues are expected to increase significantly as more states sign on to the agreement and internet and other remote sales increase. Just since 2005, the number of businesses signed up to voluntarily comply with the agreement has increased from 250 to more than 1000, and sales over the internet grew 26% this past holiday season over the previous year.
First-year Distributions
Sales tax collections from July 1, 2007 through June 30, 2008 will establish the pre-sourcing "base year" from which losses will be compared. For mitigation distributions based on sales tax revenues from July 1, 2008 through June 30, 2009, the Department of Revenue will compare each quarter’s post-sourcing sales tax revenues with the previous base-year quarter to establish the loss, subtract any new voluntary compliance/remote sales revenues and remit mitigation quarterly. Due to the two-month delay in sales tax revenue collections and distributions, the first mitigation distribution will be December 1, 2008, for July through September sales tax collections.
Future Distributions
For mitigation distributions based on sales tax collections from July 1, 2009 through June 30, 2010, and subsequent years, the Department of Revenue will distribute mitigation quarterly taking the base-year losses, less voluntary compliance/remote sales new revenues. A jurisdiction will continue to receive mitigation until its voluntary compliance/remote sales new revenues exceed its losses due to the change to destination-based sourcing.
The base-year sourcing loss calculation will not change in future years, and will not grow to reflect inflation. However, an advisory committee made up of representatives from local jurisdictions will work with the Department of Revenue to review challenges by jurisdictions that question their sourcing loss. Local jurisdictions may work through the advisory committee to present data that would improve the sourcing loss data and mitigation for their jurisdiction.
More information is available on the AWC website at www.awcnet.org/documents/mitigationconcept.pdf.
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