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Home My WebLink AboutPCD 2024-06-10 Item 1A - Ordinance - TMC Chapter 3.14 "Sales and Use Tax for Affordable Housing"City of Tukwila Thomas McLeod, Mayor INFORMATIONAL MEMORANDUM TO: Planning & Community Development Committee FROM: Laurel Humphrey, Legislative Analyst DATE: June 4, 2024 SUBJECT: Ordinance amending TMC 3.14, Sales & Use Tax for Affordable Housing BACKGROUND The proposed ordinance amends Tukwila Municipal Code Chapter 3.14 to accommodate flexibility for future changes to Washington State Law regarding the affordable housing sales tax. DISCUSSION During the 2019 legislative session, the state approved HB 1406 which is a local revenue sharing program that allows local governments to collect a portion of state sales tax to address affordable housing. In September 2019 the City Council adopted Ordinance 2613 and Resolution 1966 to allow the city's participation in this legislation, with the intention of pooling a portion of the proceeds with the South King Housing and Homelessness Partners, also established in 2019 via interlocal agreement. The City currently contributes 70% of HB 1406 proceeds to the SKHHP Housing Capital Fund. Since the passage of HB 1406, the state legislature has made changes to the provisions of the tax: • SSB 5604 was adopted in the 2023 legislative session and added administrative costs not to exceed 10% of the annual distribution to the list of allowable uses of the tax. • SB 6173 was adopted in the 2024 legislative session and increased the homeownership threshold from 60% to up to 80% for the development of affordable housing intended for owner occupancy. Staff recommends amending the Municipal Code in such a way that removes some of the detail and instead points to Washington State law as it exists now and is amended in the future. RCW 82.14.540, which allows the collection of the 1406 revenues and dictates allowable uses, is likely to continue to change over time and this approach will allow the city to accommodate future changes without requiring code amendments each time. City and SKHHP staff will continue to monitor legislative changes to the tax for impacts to Tukwila and its use of the revenue, and will keep the City Council apprised. RECOMMENDATION Staff recommends Committee approval of the ordinance to forward to the June 17, 2024 Regular Consent Agenda. ATTACHMENTS 1.Draft ordinance 1 2 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, AMENDING ORDINANCE NO. 2613, AS CODIFIED AT TUKWILA MUNICIPAL CODE (TMC) CHAPTER 3.14, "SALES AND USE TAX FOR AFFORDABLE HOUSING," AUTHORIZING THE MAXIMUM CAPACITY OF A LOCAL SALES AND USE TAX TO FUND INVESTMENTS IN AFFORDABLE AND SUPPORTIVE HOUSING; PROVIDING FOR SEVERABILITY; AND ESTABLISHING AN EFFECTIVE DATE. WHEREAS, pursuant to Ordinance No. 2613, the City Council authorized the maximum capacity of a local sales and use tax to fund investments in affordable and supportive housing as authorized by Chapter 338, Laws of 2019; and WHEREAS, the local sales and use tax is credited against the state sales and use tax so that the total tax paid by the consumer does not increase; and WHEREAS, since 2019, the City of Tukwila has been a member of the South King Housing and Homelessness Partners (SKHHP) and contributes a portion of its SHB 1406 revenue to the SKHHP Housing Capital Fund; and WHEREAS, in 2023, the Washington State Legislature passed Substitute Senate Bill (SSB) 5604, allowing cities to retain up to 10 percent of the tax for administrative costs; and WHEREAS, in 2024, the Washington State Legislature passed Senate Bill (SB) 6173, allowing cities imposing the tax to provide housing and services to persons whose income is at or below 80% of the median income if the housing and services support the development of affordable housing intended for owner occupancy; and WHEREAS, the City Council desires to amend Tukwila Municipal Code (TMC) Chapter 3.14 in accordance with the changes to state law effectuated by SSB 5604 and SB 6173 and to establish flexibility to accommodate future changes in state law; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, HEREBY ORDAINS AS FOLLOWS: 2024 Legislation: Amendments to TMC 3.14 Version: 6/4/24 Staff: L. Humphrey Page 1 of 4 3 Section 1. TMC Section 3.14.010 Amended. Ordinance No. 2613 §2, as codified at TMC Section 3.14.010, "Imposition of Sales and Use Tax for Affordable Housing," is hereby amended to read as follows: 3.14.010 Imposition of Sales and Use Tax for Affordable Housing A. There is imposed a sales and use tax as authorized by Washington State Legislature Chapter 338, Laws of 2019, as now enacted and hereafter amended, which shall be codified in Chapter 82.14 RCW, upon every taxable event, as defined in Chapter 82.14 RCW, occurring within the City of Tukwila. The tax shall be imposed upon and collected from those persons from whom the State sales tax or use tax is collected pursuant to Chapter 82.08 and 82.12 RCW. B. The rate of the tax imposed by TMC Section 3.14.010 shall be 0.0073 percent of the selling price or value of the article used. C. The tax imposed under TMC Section 3.14.010 shall be deducted from the amount of tax otherwise required to be collected or paid to the Department of Revenue under Chapter 82.08 or 82.12 RCW. The Department of Revenue will perform the collection of such taxes on behalf of the City of Tukwila at no cost to the City. D. The Department of Revenue will calculate the maximum amount of tax distributions for the City of Tukwila based on the taxable retail sales in the City in State Fiscal Year 2019, and the tax imposed under TMC Section 3.14.010 will cease to be distributed to the City of Tukwila for the remainder of any State Fiscal Year in which the amount of tax exceeds the maximum amount of tax distributions for the City as properly calculated by the Department of Revenue. Distributions to the City of Tukwila that have ceased during a State Fiscal Year shall resume at the beginning of the next State Fiscal Year. Section 2. TMC Section 3.14.020 Amended. Ordinance No. 2613 §3, as codified at TMC Section 3.14.020, "Purpose of Tax," is hereby amended to read as follows: 3.14.020 Purpose of Tax A. The City may use the moneys collected by the tax imposed under TMC Section 3.14.010 or bonds issued only, as allowed by Washington State Legislature Chapter 338, Laws of 2019, as now enacted and hereafter amended. , for the following purposes: 1. Acquiring, rehabilitating, or constructing affordable housing, which may supportive housing services under ROW 71 .2/l .385; and 2 Providing the operations and maintenance costs of new units of affordable or supportive housing; and 3. Providing rental assistance to tenants. 2024 Legislation: Amendments to TMC 3.14 Version: 6/4/24 Staff: L. Humphrey Page 2 of 4 4 B. The housing and services provided undcr TMC Section 3.14.020 may only be provided to persons whose income is at or below 60 percent of the median income of the C. In determining the use of funds under TMC Section 3.14.020, the City must consider the income of the individuals and families to be served, the leveraging of the resources made available under TMC Section 3.14.010, and the housing needs within the City. reven, Tthe-ta-x sednder T Section 3.14.010. E. The tax imposed by the City under TMC Section 3.14.010 will expire 20 y arc, to the City Council and the Mayor of the expiration date of the tax each year beginning three years before the expiration date, and shall also promptly notify the City Council and the Mayor of any changes to the expiration date. Section 3. TMC Section 3.14.030 Amended. Ordinance No. 2613 §4, as codified at TMC Section 3.14.030, "Administration and Collection - Statutory Compliance," is hereby amended to read as follows: 3.14.030 Administration and Collection - Statutory Compliance The administration and collection of the tax imposed by Chapter 3.14 shall be in accordance with the provisions of Washington State Legislature Chapter 338, Laws of 2019, as now enacted and hereafter amended, which shall be codified in Chapter 82.14 RCW. Section 4. The Finance Director is authorized to provide any necessary notice to the Department of Revenue to effectuate the tax enacted by this ordinance and to execute, for and on behalf of the City of Tukwila, any necessary agreement with the Department of Revenue for the collection and administration of the tax enacted by this ordinance. Section 5. Corrections by City Clerk or Code Reviser Authorized. Upon approval of the City Attorney, the City Clerk and the code reviser are authorized to make necessary corrections to this ordinance, including the correction of clerical errors; references to other local, state or federal laws, codes, rules, or regulations; or ordinance numbering and section/subsection numbering. Section 6. Severability. If any section, subsection, paragraph, sentence, clause or phrase of this ordinance or its application to any person or situation should be held to be invalid or unconstitutional for any reason by a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect the validity or constitutionality of the remaining portions of this ordinance or its application to any other person or situation. 2024 Legislation: Amendments to TMC 3.14 Version: 6/4/24 Staff: L. Humphrey Page 3 of 4 5 Section 7. Effective Date. This ordinance or a summary thereof shall be published in the official newspaper of the City, and shall take effect and be in full force five days after passage and publication as provided by law. PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this day of , 2024. ATTEST/AUTHENTICATED: Andy Youn, CMC, City Clerk APPROVED AS TO FORM BY: Office of the City Attorney 2024 Legislation: Amendments to TMC 3.14 Version: 6/4/24 Staff: L. Humphrey Thomas McLeod, Mayor Filed with the City Clerk: Passed by the City Council: Published: Effective Date: Ordinance Number: Page 4 of 4 6