The Legislature unanimously passed a Tax Increment Financing (TIF) bill that addresses concerns of junior taxing districts while preserving the benefits of TIF for local governments.
HB 2354 started off this session with language proposed by fire districts and fire chiefs that would have gutted the effectiveness of TIF for local governments. However, because of the advocacy of AWC and local leaders, the bill that passed the Legislature nullifies the negative impacts to cities while still addressing the concerns raised by junior taxing districts.
Under the new legislation, cities establishing a Tax Increment Area (TIA) using TIF will need to:
- Prepare a project analysis that includes:
- An assessment of any impacts to local fire services, public hospital services and emergency medical services, and any other junior taxing districts in the TIA.
- An identification of necessary mitigation for local fire services, public hospital services, and emergency medical services.
- Enter into negotiations to create mitigation agreements with a public hospital district, fire protection district, or regional fire protection service authority if those agencies will experience an impact to their assessed value of at least 20% or if the agencies’ annual report or adopted capital facilities plan demonstrates an increase to the level of services directly related to the increased development in the TIA.
- Enter arbitration to determine an appropriate mitigation plan, if jurisdictions cannot agree on proper mitigation efforts.
Cities will also need to follow new notification and public hearing requirements including:
- Provide written notice to the governing body of each taxing district within the TIA at least 90 days before submitting the project analysis to the Treasurer.
- Public hearings must occur no earlier than 90 days after submitting the project analysis to the Office of the Treasurer and all local governments and taxing districts impacted by the TIA.
- Submit the TIF project analysis to the Treasurer and all local governments and taxing districts impacted by the TIF project at least 90 days before adopting a TIF ordinance.
While these changes do add a level of administrative burden to cities carrying out a TIF project, the cost of funding mitigation to impacted taxing districts is now considered a “public improvement cost” under the bill, and cities could potentially use funds collected under TIF to cover those expenses.
HB 2354 is currently on the Governor’s desk awaiting signature.
TIF bill passes out of the House with additional tweaks
February 16, 2024
The House passed an updated Tax Increment Financing (TIF) bill off the floor Monday, further protecting the effectiveness of TIF for local governments.
HB 2354 picked up a striker amendment brought forward by the bill sponsor, Rep. Chipalo Street (D–Seattle). The adopted striker modified the bill in four ways:
- Removes the requirement for the State Treasurer to do a study on TIF projects;
- Removes the requirement to sunset a TIF project if funds are no longer necessary or obligated to pay any bonded indebtedness;
- Requires that public briefings on the TIF project cannot occur until 90 days after submitting the TIF project analysis to the Treasurer and all local governments and taxing districts impacted by the TIF; and
- Requires that the TIF project analysis must be submitted to the Treasurer and all local governments and taxing districts impacted by the TIF project at least 90 days before adopting a TIF ordinance.
The bill maintains requirements that:
- Jurisdictions forming TIF projects create mitigation agreements with impacted public hospital districts and regional fire districts; and
- If jurisdictions cannot agree on mitigation plans with public hospital districts and regional fire districts, that all parties must enter arbitration to determine an appropriate mitigation plan.
While these modifications do add a level of administrative burden to TIF projects, the current version of the bill is much more favorable to cities, as it no longer impacts the fiscal viability of a TIF project.
Dates to remember
HB 2354 is scheduled for a public hearing in the Senate Local Government, Land Use, & Tribal Affairs Committee on Thursday, February 15, at 10:30 am.
TIF bill moves forward addressing concerns and mitigating impacts to cities
February 2, 2024
With strong testimony from impacted cities, the House Local Government Committee moved an amended tax increment financing bill forward that removes negative impacts to TIF projects.
In its amended form, HB 2354 addresses several concerns raised by junior taxing bodies while preserving local government’s ability to raise adequate funding to finance infrastructure projects. The bill now requires that:
- A project analysis be conducted by local governments prior to establishing a tax increment area (TIA) to assess impacts to local emergency medical services and public hospital services.
- A TIA expires prior to the sunset date if tax allocations are no longer necessary or obligated to pay any bonded indebtedness to fund public improvement costs.
- Local governments create mitigation agreements with affected public hospital districts.
- Arbitration takes place if mitigation agreements cannot be agreed upon with impacted junior taxing districts.
These changes are a big win for cities looking to use TIF in their communities. The prior version of the bill would have allowed any impacted taxing district located within a TIA to withdraw their tax increases from being apportioned to finance the TIF project. Allowing other governing bodies to withdraw their tax dollars would have reduced available funding for TIF projects by nearly 70%.
TIF is a new and critical tool for Washington cities to finance infrastructure projects. The economic impacts of TIF projects in communities are tremendous, with current projects estimating thousands of new jobs, hundreds of new homes, and billions in increased assessed value in the TIA.
We greatly appreciate the city leaders who took the time to testify in both the House and Senate committees. AWC also appreciates the bill sponsors hearing our concerns and providing amendments to the original bill.
HB 2354 now awaits a hearing in the House Finance Committee. The companion bill, SB 6230, did not make it out of committee before the first legislative cutoff.
Two bills impacting TIF set for hearings in House and Senate
January 19, 2024
The House and Senate are set to hear companion bills that have the potential to gut the benefits of tax increment financing (TIF) for local governments.
HB 2354 and SB 6230 create a process allowing governing bodies to fully or partially withdraw their property tax increases from a TIF project. For example, if a city created a TIF project that included other taxing districts, like the county or a fire district, those governing bodies could hold a vote to exclude their property tax increases from being apportioned to finance the TIF project. The governing body’s withdrawal from the TIF project would then shift a larger financing burden onto the TIF sponsoring jurisdiction and likely render the TIF project financially infeasible.
As currently implemented, TIF allows cities, counties, and ports the authority to use the increased property tax from other governing bodies in a TIF project area to help finance the TIF project. Participation by all governing bodies in a TIF project area is critical as cities, counties, and ports only collect a modest portion of property taxes. Allowing other governing bodies to withdraw their participation from TIF projects makes TIF nearly useless as it reduces the pool of funds available to finance a TIF project.
We also think this bill creates confusion about when a taxing district could withdraw from a TIF area and whether it could be done retroactively. We would encourage cities with TIF projects or who are considering using TIF to review the bill.
AWC encourages all cities with a current TIF project or who are considering a TIF project to testify or sign in opposed on both HB 2354 and SB 6230. Instructions on how to sign in or testify can be found on the House and Senate websites.
Please note, in last week’s article we stated that the ability to withdraw from a TIF project was just for junior taxing districts. In fact, the ability to withdraw would apply to any governing body. We apologize for any confusion this may have caused.
Dates to remember
HB 2354 is scheduled for public hearing in the House Local Government Committee on Wednesday, January 24 at 8 am and for executive session on Friday, January 26 at 10:30 am.
SB 6230 is scheduled for public hearing in the Senate Local Government, Land Use & Tribal Affairs Committee on Tuesday, January 23 at 8 am.
New bills would dramatically decrease TIF effectiveness
January 12, 2024
Tax increment financing (TIF) just got off the ground in Washington. A new bill looks to significantly curtail the value of this new economic development financing tool that was just authorized in 2021.
HB 2354, sponsored by Reps. Chipalo Street (D–Seattle) and Ed Orcutt (R–Kalama), and SB 6230, sponsored by Sens. Ann Rivers (R–La Center) and Kevin Van De Wege (D–Sequim), would upend TIF by allowing junior taxing districts within a tax increment area to partially or fully withdraw their participation from the TIF project. By fully or partially withdrawing from the project, funds meant to finance the TIF area would flow back into junior taxing districts. Fewer funds flowing towards financing the project would increase the financial burden and risk on the sponsor of the TIF while allowing junior taxing districts to benefit from TIF-financed improvements without contributing to them.
As a reminder, TIF is an economic development tool that captures a property’s appreciated value by using its increased property taxes, generated by the increase in assessed value, to finance infrastructure improvements that benefit a designated area. Since the passage of TIF in 2021, 13 cities and ports have proposed or started TIF projects across the state.
AWC strongly opposes this bill as it subverts the intention and critical financing structure of TIF. As written, TIF already provides a mitigation process for emergency services impacted by a TIF area. Additionally, current law does not preclude cities and junior taxing districts from developing their own mitigation agreements.
HB 2354 and SB 6230 are not currently set for a public hearing. However, we encourage cities with a TIF or who are considering a TIF to review the legislation and contact their legislators to express concerns.