1. Legislative Update July 2013 Victoria Lincoln Government Relations Advocate victorial@awcnet.org

2. Budget, Budget, Budget State has been dealing with budget shortfalls since FY 2009  $2 billion shortfall in the fall of 2011 2013 – 2015 biennium (July 1, 2013 – June 30, 2015)  Final enacted operating budget = $33.5 billion  $2.2 billion higher than 2011 - 13  Nearly $1 billion more for K-12 education  $3.6 billion capital budget Association of Washington Cities 2

3. AWC Priorities Ensure fiscal sustainability & flexibility  Restore local liquor revenue & retain other state shared revenues  Preserve current revenue authorities, like B&O, & develop new options  Retain flexibility in lodging tax uses Foster and invest in infrastructure & economic development  Increase transportation funding & expand revenue options  Authorize tax increment financing & fine-tune other tools  Maintain critical infrastructure programs, like the Public Works Trust Fund, and refrain from diverting capital investment dollars Enhance service provision  Allow cities flexibility to respond to fiscal challenges, like managing personnel costs  Provide state funding for mandates, like municipal stormwater permits  Curb abusive public records requests Association of Washington Cities 3

4. State budget – State shared revenues Association of Washington Cities 4 Permanent diversion of local liquor revenue in 2012  ESHB 2823 permanently diverts $10 million per year of liquor excise tax from cities and counties to state general fund and freezes profit distributions at 2011 levels. Attempts to restore local liquor revenue  SB 5703/HB 1368 sought to restore liquor taxes and historic profit growth. (Did not pass)  HB 2067 sought to restore historic profit growth. (Did not pass.)

5. State budget – State shared revenues Association of Washington Cities 5 Enacted budget cut local share of liquor taxes  Legislators sought 50% reduction this biennium  May have inadvertently cut by 2/3  AWC seeking resolution Retains all other shared revenues, including:  Criminal justice assistance funds; city-county assistance account; SST mitigation; & annexation sales tax credit

6. State budget - Infrastructure funding Capital budget sweeps Public Works Trust Fund  No funding for 2014 Construction Loan List  Swept $277M from the Public Works Assistance Account into the General Fund HB 2051 redirects 67% of the Real Estate Excise Tax, 100% of the Public Utility Tax, and 100% of the Solid Waste Tax revenues from the PWAA to the Education Legacy Account through FY 2019  Leaves only a portion of REET revenues and loan repayments to fund construction loans over the next six years. Association of Washington Cities 6

7. State budget - Infrastructure funding Stormwater  $100 million ($81 million in competitive grants, up to $15 million can be used for grants for project planning and design)  Development of an ongoing comprehensive, statewide stormwater financial assistance program to be implemented beginning no later than July 1, 2015  $1.98M for Low Impact Development Training program Association of Washington Cities 7

8. State budget – Transportation No transportation revenue package Special session in November? Association of Washington Cities 8

9. Telecommunications taxes Part of state budget deal, HB 1971:  Removes sales tax exemption for all residential phone lines – expected to generate $5M in local sales taxes per year  Fixes issues raised in Sprint Spectrum case – may have required local governments to refund an estimated $249.5M in sales tax refunds Association of Washington Cities 9

10. Lodging tax HB 1253 maintains most uses of local lodging taxes set to expire on July 1, 2013  May continue to fund the operations of special events and festivals (as opposed to just “marketing”)  May continue to fund the operations of tourism-related facilities owned by non-profits.  May not fund the capital expenditures of tourism-related facilities owned by non-profits New application/funding process in municipalities over 5,000  Applications submitted to LTAC for recommendations New reporting requirements for applicants & recipients Fact sheet available on AWC’s website: www.awcnet.org Association of Washington Cities 10

11. Other city finance bills Passed Legislature  SB 5110 – Authorizes local governments to contract for purchase of supplies, materials, or equipment to the lowest bidder before sales and business and occupation taxes imposed by any local government are applied Did not pass  SB 5656 – Mandating city use of the state’s business license system  SB 5688 – Requiring uniformity in state and city B&O tax classifications  SB 5697 – Reducing the frequency of local sales tax changes  HB 1287 – Tribal property tax exemption  HB 1828 - Local Government Fiscal Health Commission Association of Washington Cities 11

12. 2014 session preview State budget woes will continue  The legislature must show “real and measurable progress” towards compliance with the McCleary decision by 2018  Estimated total cost of $9 billion through state FY 2019  Only provided $1 billion this biennium Can local liquor revenue & the Public Works Trust Fund be restored? Continued discussions about city business licenses & taxes Association of Washington Cities 12

13. Questions Victoria Lincoln victorial@awcnet.orgvictorial@awcnet.org Association of Washington Cities 360-753-4137 www.awcnet.org Association of Washington Cities 13