DECEMBER 2019 Revenue Guide - MRSC

MARCH 2022

Revenue Guide

for Washington Counties

2019 re-write created in partnership with

The Center for Government Innovation, a service of the Washington State Auditor's Office

REVENUE GUIDE FOR WASHINGTON COUNTIES

Copyright ? 2022 by the Municipal Research and Services Center of Washington (MRSC). All rights reserved. Except as permitted under the Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means or stored in a database or retrieval system without the prior written permission of the publisher; however, governmental entities in the state of Washington are granted permission to reproduce and distribute this publication for official use.

DISCLAIMER

The content of this publication is for informational purposes only and does not represent criteria for legal or audit purposes. It is intended to provide city staff and officials with an overview of their available revenue options, restrictions on the use of such revenues, and key questions to consider. It is not intended to replace existing prescriptive guidance in the BARS Manual, issued by the State Auditor's Office. You should contact your own legal counsel if you have a question regarding your legal rights or any other legal issue.

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Revenue Guide for Washington Counties | MARCH 2022

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Revision History

MRSC does our best to update this publication every year to reflect any new legislation or other relevant information impacting city and town revenues. Below is a summary of significant recent changes. If you are aware of any other sections that you think need to be updated or clarified, please contact mrsc@. To make sure you have the most recent version, please go to publications.

DATE March 2022

SUMMARY

Property Taxes: ? The 1% Annual Levy Lid Limit (101% Limit"). Added reference to tax increment

financing areas in context of calculating levy increases (ESHB 1189).

? Levy Lid Lifts. Removed statement that counties must use banked capacity before seeking a levy lid lift; this is no longer the Department of Revenue's interpretation.

? Annual Levy Certification Process. County levy certification deadline extended from November 30 to December 15 (SHB 1309). Also updated other references throughout document.

Retail Sales and Use Taxes: ? "Optional" Sales Tax/Second Half-Cent. Minor updates to reflect Klickitat

County imposing full half-cent.

? Affordable Housing Sales Tax Credit (HB 1406). Added annual reporting requirements under WAC 365-240-030; removed information concerning certain deadlines that have passed.

? Criminal Justice Sales Tax. Fiscal flexibility bill temporarily expands use of revenues (E2SHB 1069 ? 5).

? Emergency Communications (E-911) Sales Tax. New legislation amends requirements for interlocal agreement revenue sharing with cities (SHB 1155).

? Housing & Related Services Sales Tax. Expanded use of revenues (ESHB 1070) and updated number of jurisdictions that have imposed this tax.

? Mental Health & Chemical Dependency Sales Tax. Pierce County enacted this sales tax effective July 2021, so cities over 30,000 population in Pierce County are no longer eligible.

? Public Safety Sales Tax. Fiscal flexibility bill temporarily expands use of revenues (E2SHB 1069 ? 6).

Real Estate Excise Taxes (REET): ? REET 1 ? The "First Quarter Percent". Fiscal flexibility bill temporarily expands

use of revenues (E2SHB 1069 ? 10-11).

? REET 2 ? The "Second Quarter Percent". Fiscal flexibility bill temporarily expands use of revenues (E2SHB 1069 ? 12-13).

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DATE March 2022 (continued)

November 2020

August 2020 June 2020

SUMMARY

Other Excise Taxes: ? Leasehold Excise Tax. State now distributes revenue on monthly instead of

bimonthly basis (ESSB 5251 ? 17).

"State Shared" and Federal Revenues: ? Criminal Justice Distributions. Fiscal flexibility bill temporarily allows supplanting

(E2SHB 1069 ? 2).

Other Revenue Sources: ? Transportation Benefit District (TBD) Vehicle License Fees. The state Supreme

Court struck down Initiative 976 as unconstitutional, allowing cities and counties to continue collecting and expending TBD vehicle license fees.

Property Taxes: ? Validation/Voter Turnout Requirements. Added flowchart to help explain which

ballot measures require validation and which do not.

Property Taxes: ? County Road Levy. Clarified that funds can be used for pedestrian and bicycle

facilities under RCW 36.75.240.

? Affordable Housing Levy. New legislation expands use of revenues to include affordable homeownership programs for "low-income" households up to 80% of county median income (SB 6212).

Retail Sales and Use Taxes: ? Housing & Related Services Sales Tax. New legislation allows counties to

optionally impose this sales tax without voter approval (HB 1590). Bill also reimposes county "right of first refusal" deadline of September 30, 2020; cities may not impose this sales tax before that deadline.

? Affordable Housing Sales Tax Credit (HB 1406). Anticipated legislation to fix drafting error and extend deadline for cities to adopt qualifying local tax (HB 2797) was vetoed.

? Cultural Access Program Sales Tax. New legislation providing county uniformity regarding use of revenues (SB 5792).

Other Revenue Sources: ? Tourism Promotion Area Fees. New legislation removed 40,000 county

population requirement; any county may now impose these fees (ESSB 6592). Bill also provided additional definitions and authorizes additional fee up to $3 per room per night through 2027, but fees must be repealed if enough lodging businesses petition the legislative body.

? Transportation Benefit District (TBD) Vehicle License Fees. Lower courts have largely upheld Initiative 976, which has now been appealed to the state Supreme Court.

Revenue Guide for Washington Counties | MARCH 2022

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DATE December 2019

February 2019

SUMMARY

Retail Sales and Use Taxes: ? Sales Tax Exemptions. Updated exemptions for sales to nonresidents (ESSB

5997) and mergers, annexations, and consolidations (SB 5337). ? Affordable Housing Sales Tax Credit (HB 1406). New legislation establishing

affordable housing sales tax credit (SHB 1406). ? Emergency Communications (E-911) Sales Tax. New legislation increasing

maximum rate from 0.1% to 0.2% and amending revenue-sharing requirements (ESSB 5272).

Real Estate Excise Taxes: ? Real Estate Excise Taxes (REET). New legislation adopting graduated state real

estate excise tax (ESSB 5998). ? REET 2 ? the "Second Quarter Percent." New legislation expanding REET 2

revenues for affordable housing and homelessness (EHB 1219).

"State Shared" Revenues: ? City-County Assistance (ESSB 6050) Distributions. Changing distribution

formula due to new graduated state REET scale (ESSB 5998).

Other Revenue Sources: ? Franchise Fees. New FCC order requiring local governments to count most non-

monetary in-kind contributions toward the 5% cable franchise fee. ? Transportation Benefit District (TBD) Vehicle License Fees. Citizen initiative

repealing TBD license fee authority, pending legal challenges (I-976).

Entire document reviewed, re-written, and re-published in its entirety.

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