07-02-2019 HB 1406Impact of Implementing HB 1406 and Qualifying Taxes for Affordable Housing
City Council
July 2, 2019
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Policy Question
Should City Council pursue a voter approved qualifying tax for the November general election?
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Timing of Presentation
Based on information received last week and potential Council action in time for the November general election, HB 1406 needed to be discussed this evening.
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HB 1406 Overview
The Washington State legislature passed HB 1406 in 2019, focusing on affordable housing.
HB 1406 allows cities and counties to recapture a portion of the existing sales tax to be used in the following ways:
Acquiring, rehabilitating, or constructing affordable housing;
Funding operations and maintenance costs of new units; and/or
For cities with populations less than 100,000, provide rental assistance.
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Funding via HB 1406
Without a qualifying tax: the City of Federal Way would be eligible to recapture 0.0073% of the existing sales tax and the same amount would go to King County if it participates in HB
1406.
With a qualifying tax: The City of Federal Way does not currently have a qualifying tax. If it were to pass a voter approved qualifying tax, the City would be eligible to recapture 0.0146%
of the existing sales tax and revenue from the qualifying tax.
*Revenue estimates are based on 2018 sales tax; actual revenue will be based on 2019.
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Process for Participating
HB 1406, becoming a participating city:
Pass a resolution of intent by January 2020.
Pass an ordinance by July 2020.
There is no financial impact for participating, though there may be staff time associated with implementing the plan for the use of the funds.
Qualifying tax:
If City Council wanted to pursue a qualifying tax, it would need to be enacted by July 2020.
A qualifying tax could go to voters for approval in November, February, or April.
Financial impact:
The cost for the November ballot would be negligible;
A special election ballot would be considerably more expensive and would depend on how many other cities have ballot measures.
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Qualifying Taxes
HB 1406 allows the City of Federal Way to access the higher amount of funds if it were to enact one of four voter approved qualifying taxes, if eligible.
The City is not eligible to enact the tax authorized by RCW 82.14.460 as King County has already enacted this tax.
The City would be eligible to for the following taxes, provided that the funds be used for affordable housing:
Property tax:
RCW 84.52.105
RCW 84.55.050
Sales tax:
RCW 82.14.530
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Recommendation
Delay action to be able to:
Create a plan for use of the funds including setting priorities and process.
Engage in discussion with South King Housing and Homelessness Partners (SKHHP).
A capital fund may be setup as part of SKHHP allowing for funds to be pooled and better leveraged.
Engage in discussions with King County.
If City Council wanted to pursue passing a voter approved qualifying tax, delaying action would allow time to fully develop all required documents, an implementation plan for the funds,
an outreach plan, and coordinate efforts with other cities that may also be considering a qualifying tax.
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Recommendation
Mayor Ferrell does not recommend passing a new tax, but does recommend becoming a participating city to access the recaptured sales tax available via HB 1406.
Mayor Ferrell supports the staff recommendation to delay action to allow time to develop an implementation plan and engage in further discussions with partners such as other cities,
SKHHP, and King County.
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Questions?
City Council
July 2, 2019
Impacts of Implementing HB 1406 and Qualifying Taxes for Affordable Housing
Staff Contacts:
Sarah Bridgeford, Community Services Manager
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