Washington state’s TIF fix expected to spark infrastructure projects

Washington Gov. Jay Inslee signed into law a bill that expands the eligible uses of a tax increment financing program to spur infrastructure and economic development projects in the state.

Tax increment financing is a tool for local governments to encourage private development and investment by tapping the increase in assessed property values that results from new development to repay bonds that funded related public improvements.

Washington State Treasurer Mike Pellicciotti requested the changes outlined in House Bill 1527, the tax increment financing bill, sponsored by Rep. Sharon Wylie, D-Vancouver.

“In partnership with a bipartisan coalition of support, we’ve taken a concrete step to ensure a pathway for key local development projects to move forward for the benefit of communities in every part of Washington,” Pellicciotti said in a statement.

Washington Gov. Jay Inslee signed the tax increment financing bill championed by State Treasurer Mike Pellicciotti on Tuesday.

Washington Governor’s Office

The law employs technical corrections to the state’s tax increment financing law approved in 2021 to make it more user-friendly and allow for expanded uses.

One project likely to move ahead thanks to the signing of HB 1527 is the redevelopment of Terminal 1 at the Port of Vancouver where 40,000-square-feet in development is planned along the waterfront, including a farmers’ market, restaurants, wineries, housing and office space.

When the port tried to make use of the TIF law, it discovered the statute contained a technical omission relating to personal property, said Aaron Sherman, a spokesman for the Washington Treasurer’s office.

The port had expected to lease port-owned land to developers through long-term leases, but Sherman said, it was discovered that such leaseholds would be categorized as personal property and would not be included in the calculation of TIF revenues, making the port’s project unfeasible.

For tax purposes, the state classifies property as real property or personal property, Sherman said. Privately owned improvements on publicly owned land are considered to be personal property. Developer-owned improvements on leased land fell under the personal property categorization as well, prior to the law.

“As this technical omission was not in the spirit of the original legislation, the Washington State Treasurer’s Office took the lead in advancing a bill to address this issue and enable the port, and other Washington municipalities to move forward with their projects,” Sherman said.

Changes to HB 1527 include applying the definition of real property outlined in property tax statues to ensure private investments made on state and local government-owned land are included in the increment value.

It also added the relocation and construction of a government-owned facility as an eligible project and allows site acquisition and the expansion of public improvements as a public improvement cost.

The change does not impact any apportionment or distributions occurring in calendar years before 2024.

“The ports not being able to participate in TIF programs has left money on the table for countless cities across the state,” Wylie said. “It’s great to see this technical fix in the bill is already paying dividends. The revenue raised will create jobs and fund public spaces we can all enjoy. I look forward to seeing what else comes from this.”

Sen. Annette Cleveland, D-Vancouver, who sponsored the Senate companion of the legislation, Senate Bill 5539, said the legislation is also expected to propel projects in Kirkland, Pasco, Lakewood and the Chelan Regional Douglas Port Authority.

Representatives from the Washington Public Ports Association, the Association of Washington Cities, Port of Vancouver USA, Chelan Douglas Regional Port Authority and the city of Pasco all testified in favor of the bill.

The treasurer’s office will be hosting an event next month in partnership with Wylie to explain how local governments can use the improved financing mechanism.

“This is a big win for municipal governments and a continued commitment to build and rebuild thriving local economies,” Pellicciotti said.

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