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HomeMy WebLinkAboutDISCUSSION re HB2442 revenue tools 1 JEFFERSON COUNTY BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST TO: Board of County Commissioners Josh Peters, County Administrator FROM: Heidi Eisenhour, Commissioner Jeff Chapman, Assessor Stacie Prada, Treasurer Apple Martine, Public Health Director DATE: April 27, 2026 SUBJECT: HB 2442 – Revenue tools for local government – Potential applications for Jefferson County STATEMENT OF ISSUE: House Bill (HB) 2442, passed in the 2026 Legislative Session, grants authority and allows local governments to explore new revenue options, such as expanded property or excise taxes, that can actually help keep pace with the cost of providing services. The bill was at least partially inspired by HB 1805 from the 2025 Session, sponsored by our own Rep. Steve Tharinger, which proposed a new 0.1% optional local sales and use tax for counties to fund services for children and families, focused on early intervention, mental health, and well-being. HB 1805 did not pass in the 2025 session but was included this year. Beyond this measure, HB 2442 provides several new tools to local governments: • Levy Lid Lifts: Extends the maximum duration of a multi-year permanent property tax levy lid lift from 6 to 10 years. • New Revenue Tool: As described above, allows councilmanic adoption of a local sales and use tax of 0.01% for children and family services. • Housing & Public Health: o Expands the use of existing 0.1% affordable housing and related services sales and use taxes and state-share affordable and supportive housing sales tax to include additional affordable housing and mental health services. o Allows counties to either levy a separate public health clinic levy (5 cents per $1,000 of assessed value) in addition to their county's general property tax levy or allocate a portion of their county's general property tax levy to public health clinics. • Real Estate Excise Tax (REET): Expands the use of REET for capital projects, including housing and homeless services. See the attached table, which lists and describes each of the tools within HB 2442 and their potential application in Jefferson County. 2 ANALYSIS: Jefferson County is staring down a fiscal cliff that threatens to dismantle services our communities rely on. The set of tools in HB 2442 have complex implications for Jefferson County and must be considered carefully. Several of them would provide new revenue, which we know from our recent budget constraints is sorely needed. For decades, the arbitrary 1% cap on property tax revenue growth has proven to be a structural problem that hinders our ability to keep up with basic costs. While inflation has been 2.5-5+% in the past few years, one of our main sources of revenue has been artificially suppressed at 1% (plus new construction). We are being asked to run a 2026 county, with rising public defense and risk management costs to name just two, on a 2001 revenue model, and the math simply does not work without new tools. HB 2442 was an effort by our state legislature to help. For additional information, see: • Legislature bill page for HB 2442: https://app.leg.wa.gov/billsummary?Year=2025&BillNumber=2442 • MRSC article entitled, “Significant Changes Coming to Levy Lid Lifts in 2026”: https://mrsc.org/stay-informed/mrsc-insight/april-2026/levy-lid-lift-changes FISCAL IMPACT: TBD. RECOMMENDATION: Review, discuss, and consider pursuing one or more of these new tools. REVIEWED BY: ______________________________________ ________________ Josh Peters, County Administrator Date 4/23/2026 SECTION RCW DESCRIPTION OF NEW AUTHORITY EFFECTI VE DATE MECHANIS M WHO CAN USE REVENUE - EXISTING OR NEW POTENTIAL (Proposed Change) JEFFERSON COUNTY POTENTIAL USES CURRENT LAW AND FINE PRINT PART I - USE OF LOCAL REAL ESTATE TAX REVENUES 82.46.035 Updates the definition of capital projects eligible for funding to include the abatement of nuisance properties. 7/1/2026 Update to definition of capital projects Cities, counties EXISTING - Expands eligible uses for affordable housing- related projects Allows for use on abatement projects. Jefferson Counties REET Rate is currently 0.50% - as we are a GMA planning county. From the bill report: A local gov may use REET 2 revenue for abatement of nuisance properties. PART II - LOCAL SALES AND USE TAXES TO FUND SERVICES FOR CHILDREN AND FAMILIES 82.14 (new)Part II allows cities or counties to impose a new 0.01% local sales and use taxes to fund additional services to assist children and their families, including: 1. Child care. 2. Perinatal support services. 3. Before-school and after-school youth services addressing mental, social, behavioral, and physical health. 4. Workforce capacity building. 5. Shelter and rental assistance. 6. Client transportation. 1/1/2027 New Sales Tax Authority - 0.01% Cities, counties NEW - Rec centers A county must provide a city within the county a credit against its own tax if they both impose the children and families tax. Allows new local option sales and use tax of 0.01% for services supporting children and families with various workforce, care, housing, pregnancy, transportation, and mental health supports. PART III - LOCAL SALES AND USE TAX FOR HOUSING AND RELATED SERVICES 82.14.530, 82.14.540 Cities and counties may impose sales and use taxes to fund costs associated with housing and related services. The tax rate is up to 0.1%, which includes a combined rate from a city and the county. Cities and counties may impose a state-shared tax for costs associated with affordable and supportive housing. The rate can be 0.73% or 1.46% depending on certain qualifying requirements. The tax is capped for jurisdictions individually at an amount based on fiscal year 2019 taxable sales. 7/1/2026 ALREADY COLLECTING - Sales Tax Cities, counties EXISTING - This addds expanded options related to using the 0.1% we already collect - new and existing affordable housing rehabilitation and rental assistance Already using. Read fine print to the right. Is there additional capacity here? Allows a city or county to expand the use of funds from the housing and related services tax for the rehabilitation of existing affordable housing units, including emergency, transitional, and supportive housing, and to use the remaining funds for rental assistance. This part also allows counties or cities to enter into interlocal agreements with one or more counties, cities, or public housing authorities to issue bonds secured by the pooled tax distributions from the housing and related services sales and use taxes. This part expands the use of state-shared affordable and supportive housing tax revenue to include both new and existing affordable housing units. PART IV – PROPERTY TAX PRORATIONING 84.52.043, 84.52.010 Part IV removes the following from the $5.90 aggregate levy limit: - The separate public health clinic levy (established in Part VIII).- The separate mental health levy (established in Part IX).- The separate veterans’ fund levy (established in Part IX). Part IV also includes the separate public health clinic, mental health, and veterans’ fund levies within the Constitutional 1% limit and establishes a prorationing order for those levies under that limit. Part IV exempts 25 cents of a levy available to a fire protection district from the $5.90 aggregate levy limit. Takes effect beginning with property taxes due for calendar year 2027 SEE PARTS VIII and IX below Counties Allows certain property taxes (included in part 8, 9, & 10 of this table) to exceed the $5.90 local maximum rate limit SEE PARTS VIII and IX below The law limits levies with the $5.90 aggregate limit, meaning the total of the rates for the regular levies of most local taxing districts cannot exceed $5.90 per $1,000 of assessed value. The Washington Constitution limits the total amount of regular property taxes imposed on an individual parcel of property to 1% of its market value (Constitutional 1% limit). This equals $10 per $1,000 of market value. If the total rates exceed either the $5.90 aggregate limit or the Constitutional 1% limit, then the law reduces or eliminates the levies of certain taxing districts in a particular order through a process referred to as prorationing. PART V - EXCEEDING REGULAR PROPERTY TAX LEVY LIMITATIONS 84.55.050 Part V increases the maximum number of years that voters may authorize single-year levy increases from one to two, and from six to ten for multi-year annual levy increases. 7/1/2026 Property tax levy 'lid lift'. Cities, counties, & other local taxing districts EXISTING - Increases the 1-year limit on one-time voter- approved lid lifts to 2 years and increases the 6-year limit on multi-year voter-approved property taxes to 10 years A taxing district may ask its voters to authorize a property tax levy amount exceeding the limit factor, otherwise known as a "lid lift." Lid lifts may result in an increase in the limit factor for a single year or multi-year up to a maximum of six consecutive years. The result of an increase in the limit factor can temporarily or permanently affect future levy limit calculations. PART VI - SALES TAX ON RENTAL CARS 82.14.049 Part VI allows counties to use rental car tax revenues for criminal justice purposes.7/1/2026 Sales tax share Counties EXISTING - Expands uses of revenues for criminal justice purposes. Currently - Counties may impose a rental car tax to fund public sports facilities. SECTION RCW DESCRIPTION OF NEW AUTHORITY EFFECTI VE DATE MECHANIS M WHO CAN USE REVENUE - EXISTING OR NEW POTENTIAL (Proposed Change) JEFFERSON COUNTY POTENTIAL CURRENT LAW AND FINE PRINT Part VII - FLOOD CONTROL ZONE DISTRICTS RECOVERY ASSISTANCE 86.15.080 Part VII allows a Flood Control Zone District to expend funds, or transfer funds to the county legislative authority in which the zone is located, for the purpose of providing county- administered flood recovery assistance to households and businesses damaged by a flood event occurring within the zone that is the subject of an emergency proclamation issued by the governor. 7/1/2026 Flood control district Governor- designated emergency flood zones Allows emergency flood zones to spend or transfer funds to a county for flood recovery to households and businesses damaged in a flood zone. The current flood control zone districts in Jefferson County have not yet levied. Countywide Flood Zone District, Res 94- 84; 3 Sub- zones: Brinnon (Res 96-84), Big Quilcene (Res 96-84), Little Quilcene (Res 45-97) Currently - A Flood Control Zone District is a special-purpose district that is created for undertaking, operating, or maintaining flood control projects, stormwater control projects, or groups of projects that are of special benefit to specified areas of the county. Part VIII - COUNTY PUBLIC HEALTH CLINIC PROPERTY TAX 84.52 (new)Part VIII allows counties to either levy a separate public health clinic levy in addition to their county's general property tax levy or allocate a portion of their county's general property tax levy to public health clinics. Either option allows a maximum rate of 5 cents per $1,000 of assessed value. The tax imposed must be used for operations, maintenance, and capital expenses of public health clinics. Part VIII exempts the public health clinics levy from the limit factor for the first year the county approves to impose the levy. Part VIII also removes the separate public health clinics levy from the $5.90 aggregate levy limit. 7/1/2026 Property tax Counties NEW - $0.05 / $1,000 of value. Allows new $0.05 property tax levy for the operation, maintenance, and capital expenses of public health clinics Public Health Clinics Currently - Counties cannot impose a property tax levy or earmark funds from the county general levy for public health clinics. The law limits property tax levies using a limit factor. For taxing districts with a population of less than 10,000, the limit factor is 101%. For all other districts, the limit factor is the lesser of 101% or 100% plus inflation. However, if inflation is less than 1%, taxing districts, except the state, that adopt a substantial need resolution can have a limit of up to 101%. The law limits levies with the $5.90 aggregate limit, meaning the total of the rates for the regular levies of most local taxing districts cannot exceed $5.90 per $1,000 of assessed value. PART IX – VETERANS’ ASSISTANCE PROPERTY TAX LEVY AND THE MENTAL HEALTH AND DEVELOPMENTAL DISABILITIES ASSISTANCE PROPERTY TAX LEVY 71.20.110, 73.08.080, 84.55.005 Part IX allows counties to either levy a separate mental health services levy in addition to their county's general property tax levy or continue to allocate a portion of their county's general property tax levy to mental health services. Either option requires a rate of 2.5 cents per $1,000 of assessed value. This part of the bill removes the provision allowing the mental health services levy to be modified based on an increase or decrease of the county's regular levy amount in the prior year. Part IX also allows counties to either levy a separate veterans' fund levy in addition to their county's general property tax levy or continue to allocate a portion of their county's general property tax levy to veterans' fund. Either option allows a maximum rate of 27 cents per $1,000 of assessed value. This part of the bill removes the provision allowing the veterans' fund levy to be modified based on an increase or decrease of the county's regular levy amount in the prior year. In addition, Part IX establishes a limit factor of the lesser of 101% or 100% plus inflation for the mental health services and veterans' fund levies, along with the county public health clinic property tax levy, except in a county with a population of less than 10,000, then 101%. Takes effect beginning with property taxes due for calendar year 2027. Property tax Counties NEW (VETERANS) - $0.27/$1000 of value. NEW (MENTAL HEALTH) $0.025/$1,000 of value. Exempts these levies from the $5.90 local aggregate rate limit and clarifies how the 101% annual levy growth limit applies to each Mental health services and services coordinating and providing for people with developmental disabilities (mental health services) receive an allocated portion of the county’s general property tax levy. The rate is 2.5 cents per $1,000 of assessed value. The rate may increase or decrease by the same percentage as the increase or decrease in the county's general property tax levy from the prior year. The veterans' fund) receives an allocated portion of a county’s general property tax levy. The rate must be between 1.125 cents and 27 cents per $1,000 of assessed value. The rate may increase or decrease by the same percentage as the increase or decrease in the county's general property tax levy from the prior year. The amounts levied for the mental health services and the veterans' fund reduce the overall amount of the county general property tax levy remaining for county expenses. PART X - FIRE PROTECTION DISTRICTS 52.02.160, 52.02.180, 84.55.092, 84.52.125, 52.14.140 If a city or town with a population of 500,000 or less creates a fire protection district on or after July 1, 2026, it must reduce its statutory maximum rate by the rate levied by the fire protection district. In addition, this bill allows a city or town to notify the public of a newly created fire protection district on its website or in a local newspaper and also allows additional notice by mail or any other method. 7/1/2026 Property tax Cities Allows single cities to establish voter-approved fire protection districts without giving up city tax revenue authority (See HB 2224) A city or town may create a fire protection district with the same boundaries as the city or town. They must notify the public by putting a notice in a local newspaper for three consecutive weeks. Voters must also approve the creation of the fire protection district. The city or town may propose property taxes as a source of revenue for the fire protection district. If the fire protection district levies a property tax, the city or town must reduce its general fund levy by the total amount levied in the first year by the fire protection district. This reduced amount will become the new highest lawful levy for the city or town and will be used for future levy limit calculations.