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Tax Increment Financing (TIF) in Washington

This page provides an overview of tax increment financing (TIF) in Washington State, which is much more limited than in other states.


Overview

Tax increment financing (TIF) is a method of redistributing property tax collections within designated areas to finance infrastructure improvements within these designated areas.

Washington State does not have the tools for tax increment financing found in other states. Attempts to authorize the use of state property tax revenue in Washington to finance developments through TIF have been struck down by the voters and the courts. The 1982 the Community Development Refinancing Act (Ch. 39.88 RCW) was ruled unconstitutional in Spokane v. Leonard, 127 Wn.2d 195 (1995), on the grounds it diverted tax revenue intended to support the common schools. Washington voters rejected attempts in 1973, 1982, and 1985 to amend the Washington Constitution and authorize tax increment financing.

Legislation was passed in 2001, Community Development Refinancing, to rectify the problems of the 1982 legislation. It was further amended in 2002. In 2006 the legislature supplemented this existing tax increment finance legislation with the Local Infrastructure Financing Tool Program (LIFT). The LIFT program was amended in 2009. In 2006, the Hospital Benefit Zone (HBZ) Financing Program was created. In 2009, the legislature passed the Local Revitalization Financing (LRF) program.


Statutes

  • Ch. 39.89 RCW - Community Revitalization Financing (CRF) - Authorizes counties, cities, towns, and port districts to create tax increment areas within their boundaries where community revitalization projects and programs are financed by diverting a portion of the regular property taxes imposed by local governments within the tax increment area.
  • Ch. 39.100 RCW - Hospital Benefit Zones (HBZ) - This program is similar to the LIFT program. However, this program does not include any incremental property tax revenues. Instead only incremental sales and use taxes are calculated and used. The HBZ program is intended to encourage private business development and the development of a hospital within a hospital benefit zone. Similar to the LIFT program, the HBZ program authorizes a state contribution for public improvements within the zone. From Tax Increment Financing Type Programs in Washington State, DOR
  • Ch. 39.102 RCW - Local Infrastructure Financing Tool Program (LIFT) - Provides funding for local infrastructure using sales tax, property tax, and selected other excise tax increases generated by an economic development project as part of a revenue development area designated by the sponsoring local government.
  • Laws of 2009, ch. 267 (ESSB 5901) - Amended Ch. 39.102 RCW - Is very helpful for those cities that are already using the LIFT program. The amendments did the following:
    • Expanded limitations on the local sales and use tax rate set by sponsoring and cosponsoring local governments.
    • Set a September 1, 2009 deadline for certain sponsoring local governments to select a local sales and use tax rate.
    • Eliminated requirements for "base year and annual" measurement year calculations of state and local excise tax revenues.
    • Required that before imposing the local sales and use tax, a sponsoring local government must estimate that certain revenues will equal or exceed the amount awarded to the project by the Community Economic Revitalization Board.
    • Made various technical changes and adds reporting and notice requirements. From AWC 2009 Legislative Bulletin.
  • Ch. 39.104 RCW - Local Revitalization Financing (LRF) - Participating local governments, such as cities, counties, and port districts, may create revitalization areas, and may use certain tax revenues which increase within the area to finance local public improvements. The following sources of revenues are used for the payment of bonds which are issued to finance improvements: increased local sales/use tax revenues and property tax revenues generated from within the revitalization area; additional funds from other local public sources; and a local sales/use tax that is credited against the state tax. On final passage, the bill was amended to include seven pilot projects, and established a first come, first serve project award process that will take effect in the next biennium. Variations of this legislation have been proposed for the past decade; this was a major policy advancement for our cities, other local governments, and for the private sector that will look to partner with local governments. From AWC 2009 Legislative Bulletin.

Background Articles on Legislation


Implementation

  • Local Revitalization Financing, Washington State Department of Revenue
  • Local Infrastructure Financing Tool 2010 Report, Report to the Legislature, Washington State Department of Commerce, 04/15/2011 - Provides narrative descriptions of the nine awarded projects submitted by the award recipients in March 2010 - Bellingham, Bothell, Everett, Federal Way, Mount Vernon, Puyallup, Spokane County, Vancouver and Yakima
  • Bellingham Waterfront New Whatcom Finances and Economics - Scroll down to see LIFT documents
  • Everett Revenue Development Area
  • Federal Way
    • Ordinance No. 13-742 - Imposes a local sales and use tax to be credited against the state sales and use tax for purposes of utilizing local infrastructure financing, passed 05/21/2013
    • Ordinance No. 07-555 - Establishes a revenue development area (RDA), passed 06/19/2007
    • Local Sales Tax Change Federal Way Revenue Development Area effective January 1, 2008, Washington State Department of Revenue
  • Spokane
    • Ordinance No. C33551 - Establishes the Iron Bridge Tax Increment Area; exhibits include council action memorandum, Spokane County resolution agreeing to the proposal, and agreement between city and county to use community revitalization financing
    • Tax Increment Financing Areas, Spokane Planning and Development Group
  • University Place - Town Center Project
    • Ordinance No. 557, 08/2009 - Establishes a revitalization area and authorizing community revitalization financing program application
    • Ordinance No. 523 passed 05/2008 - Establishes a revenue development area and authorizes a community economic revitalization board local infrastructure financing tool competitive program application- Project includes 1,200 stall public parking garage; park, open space and public art improvements; enhanced pedestrian sidewalks, cross-walks and a public plaza; grid-roads, streets, street lighting and traffic control improvements; and water, sewer, storm water, gas, electric and other utility infrastructure improvements.
    • University Place Town Center Project, Delta Development Group
  • Vancouver Ordinance M-3834 - Creation of the Riverwest Revenue Development Area (RDA) and making other findings and declaration in support of the city's application to the state Community Economic Revitalization Board (Board) for (LIFT) financing

Last Modified: May 23, 2018